OUTCROP Newsletter of the Rocky Mountain Association of Geologists
Volume 67 • No. 5 • May 2018
2018 Summit Sponsors Platinum Sponsor
Gold Sponsors
Silver Sponsors
NORTH RANCH RESOURCES
OUTCROP | May 2018
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Vol. 67, No. 5 | www.rmag.org
OUTCROP The Rocky Mountain Association of Geologists
910 16th Street • Suite 1214 • Denver, CO 80202 • 303-573-8621 The Rocky Mountain Association of Geologists (RMAG) is a nonprofit organization whose purposes are to promote interest in geology and allied sciences and their practical application, to foster scientific research and to encourage fellowship and cooperation among its members. The Outcrop is a monthly publication of the RMAG.
2018 OFFICERS AND BOARD OF DIRECTORS PRESIDENT
2st VICE PRESIDENT-ELECT
Terri Olson tmolson8550@gmail.com
Sophie Berglund sberglund@raisaenergy.com
PRESIDENT-ELECT
TREASURER
Tom Sperr tsperr@bayless-cos.com
Robin Swank robin.swank@gmail.com
1st VICE PRESIDENT
TREASURER-ELECT
David Katz davidkatz76@gmail.com
Eryn Bergin eryn.bergin@aec-denver.com
1st VICE PRESIDENT-ELECT
SECRETARY
Heather LaReau heatherthegeologist@gmail.com
Anna Phelps aphelps@sm-energy.com
2nd VICE PRESIDENT
COUNSELOR
Tracy Lombardi tracy.lombardi@inflectionenergy.com
Jim Emme jim_emme@yahoo.com
ADVERTISING INFORMATION
Rates and sizes can be found on page 62. Advertising rates apply to either black and white or color ads. Submit color ads in RGB color to be compatible with web format. Borders are recommended for advertisements that comprise less than one half page. Digital files must be PC compatible submitted in png, jpg, tif, pdf or eps formats at a minimum of 300 dpi. If you have any questions, please call the RMAG office at 303-573-8621. Ad copy, signed contract and payment must be received before advertising insertion. Contact the RMAG office for details.
RMAG STAFF EXECUTIVE DIRECTOR
Barbara Kuzmic bkuzmic@rmag.org MEMBERSHIP & EVENTS MANAGER
Hannah Rogers hrogers@rmag.org PROJECTS SPECIALIST
Kathy Mitchell-Garton kmitchellgarton@rmag.org LEAD EDITOR
Cheryl Fountain cwhitney@alumni.nmt.edu ASSOCIATE EDITORS
Kira Timm kira.k.timm@gmail.com Ron Parker ron@bhigeo.com Holly Sell holly.sell@yahoo.com DESIGN/LAYOUT
Nate Silva nate@nate-silva.com
DEADLINES: Ad submissions are the 1st of every month for the following month’s publication. WEDNESDAY NOON LUNCHEON RESERVATIONS
RMAG Office: 303-573-8621 | Fax: 808-389-4090 | staff@rmag.org or www.rmag.org The Outcrop is a monthly publication of the Rocky Mountain Association of Geologists
Vol. 67, No. 5 | www.rmag.org
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Outcrop | May 2018 OUTCROP
Save The Dates! June 9, 2018
May 10, 2018 Edgar Mine Tour
Front Range Geo-Hazards
Location: Idaho Springs, CO
Location: Front Range/Golden, CO
June 30, 2018
July 1, 2018
Mineral Collecting - Calumet Iron Mine
Mineral Collecting - Sedalia Copper Mine
Location: Salida, CO
Location: Salida, CO
July 14, 2018
August 4, 2018
Leadville Mining District Tour
Ammonite Fossil Trip
Location: Leadville, CO
Location: Kremmling, CO
August 25, 2018
Date - TBD
POSSIBLE 3 Day Permian Basin Field Trip in late September!
Horseshoe Cirque
Location: Fairplay, CO
September 8-9, 2018
October 27-28, 2018 Picketwire Canyonlands Dinosaur Trackways
Upper Arkansas Valley Location: Salida, CO
Location: La Junta, CO
Trip details, pricing and registration information can be found at
www.rmag.org.
email: sta@rmag.org
phone: 303.573.8621
OUTCROP | May 2018
910 16th Street #1214, Denver, CO, 80202
4
fax: 888.389.4090
web: www.rmag.org
Vol. 67, No. 5 | www.rmag.org
follow: @rmagdenver
OUTCROP Newsletter of the Rocky Mountain Association of Geologists
CONTENTS FEATURES
ASSOCIATION NEWS
20 What RMAG Did For Its Members In 2017 / Why You Should Be A Summit Sponsor For 2018!
2 RMAG 2018 Summit Sponsors
46 Lead Story: Historical Analysis of the Real Global Price of Oil
9 Geo Train Trip to AAPG Ace, Salt Lake City
DEPARTMENTS
11 AAPG ACE, Salt Lake City Short Course
4 On The Rocks Field Trips, 2018 7 RMAG May 2018 Short Course
6 RMAG April 2018 Board of Directors Meeting
13 2018 RMAG Golf Tournament
10 President’s Letter
17 RMAG July Short Course
26 RMAG Luncheon Programs: Jeffrey A. May, PhD
19 RMAG Dinner: Scott W. Tinker
28 RMAG Luncheon Programs: Matt Silverman 30 Mineral of the Month: Titanite 43 Welcome New RMAG Members! 45 In The Pipeline 62 Outcrop Advertising Rates
15 2018 RMAG Spotfire Course
21 2018 Sporting Clay Tournament 23 Call For Papers – RMAG/ DWLS Fall Symposium
COVER PHOTO Craggy terrain of Herman Gulch Trail in Colorado; part of the Continental Divide Trail. Photo by Cheryl Fountain.
25 RMAG Core Workshop 27 2018 Rockbusters Bash 42 RMAG Foundation Names Excellence in Earth Science Award Recipients
64 Advertiser Index
44 RMAG Foundation offers thanks to ‘Friends of Bob Cluff Society’ 62 Professional Awards Committee Seeks Nominee Suggestions
64 Calendar
Vol. 67, No. 5 | www.rmag.org
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OUTCROP | May 2018
RMAG APRIL 2018 BOARD OF DIRECTORS MEETING By Anna Phelps, Secretary aphelps@sm-energy.com
fieldtrips are open for registration on the RMAG website and there are 87 registrants already! These trips are going to fill up fast, so make sure you sign up pronto! You don’t want to miss out on mine tours, dinosaur footprints, ammonite fossil 6
hunting, or Cambrian through Mississippian strata in Horseshoe Cirque, among many other exciting trips! The RMAG Foundation presented a grant to the RMAG Board of Directors during the
OUTCROP | May 2018
Greetings fellow rock lovers! Field season is almost upon us. I hope you’re enjoying early glimpses of outcrops as the snow slowly melts out of the high elevations. Get ready for a summer packed with RMAG fieldtrips and opportunities to get your hands on some outcrops! The April meeting of the RMAG Board of Directors was held on April 18, 2018 at 4:00 PM. All board members except Heather LaReau and Tom Sperr were present. Treasurer Robin Swank reported that RMAG continues to be ahead on revenue and behind on expenses in 2018. Executive Director Barbara Kuzmic reported that membership is up by 100 members to 1,618. There were $455 in publication sales in March. It will be a busy summer of RMAG events and registration for those events is filling up fast. The Continuing Education Committee continues to work on their many events planned for 2018, including five scheduled short courses on topics such as borehole imaging, Spotfire basics, spatial modeling and geostatistics, and coring basics. The committee is beginning to plan a Permian Basin Symposium for 2019. The Publications Committee has a special publication in the pipeline for the fall, but is still in need of your submissions. The On the Rocks Committee
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Vol. 67, No. 5 | www.rmag.org
RMAG SHORT COURSE Fundamentals of Borehole Imaging Applications in Conventional and Unconventional Reservoirs A one day course discussing technology, applications and interpretation objectives Andy Duncan, Senior Geologist, Task Fronterra Geoscience, Houston
8:30am - 4:00pm Denver Place 999 18th St, Denver, CO 80202 Member: $175 Non-Member: $225 Student $85 Register Online www.rmag.org
05 09 18
email: sta@rmag.org phone: 303.573.8621 Vol. 67, No. 5 | www.rmag.org 910 16th Street #1214, Denver, CO, 80202
The agenda for this course looks at imaging tool history and what technology is available currently and in the near future. It will discuss what data comprises an imaging dataset, how images are generated and the basic elements of image QC. The limitations of measurement types will be considered and appropriate tool choice for the desired application. Structural interpretation objectives will touch on subsurface zonation, fault and fracture characterization and the analysis of in-situ stress indicators. Sedimentological approaches will discuss lithofacies analysis, sediment dispersal and considerations for the interpretation of depositional environment. The ďŹ nal topic will demonstrate how the value of image data can be maximized by integrating with core and various petrophysical measurements, and introduce some novel data applications. Andy Duncan has worked in the Oil and Gas Industry for nearly 37 years. Before joining Task Fronterra Geoscience as a Senior Geologist and US Onshore Business Development Manager he was most recently a Senior Geoscience Advisor in the North American RDS consultancy group within Baker Hughes. Previously, he was Owner/Field Geologist at his own company, Gattageo LLC, and has worked for Fronterra, Z&S, Robertson Research, Corex and Geochem. He holds MSc (Sedimentology) and BSc (Applied Geology) degrees from Aberdeen and Strathclyde Universities in Scotland. Designated as a Subject Matter Expert in Geology/Sedimentology by BHI in 2012 he has been training geologists for over 2 decades. Andy is skilled in subsurface interpretation, and particularly in the interpretation of borehole image data, core and outcrop. He is a Chartered Engineer (CEng) and Professional Member of the Institution of Materials, Minerals and Mining (MIoM3), SCA Life Member, and has Active Memberships with AAPG, SPWLA and HGS.
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fax: 888.389.4090
web: www.rmag.org OUTCROP | May 2018
follow: @rmagdenver
RMAG APRIL 2018 BOARD OF DIRECTORS MEETING
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Formation Evaluation • Petra® Projects Reserve Reports • Drilling Engineering • Well Plans
Bill Donovan
Geologist • Petroleum Engineer • PE
(720) 351-7470 donovan@petroleum-eng.com www.petroleum-eng.com
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Summit Program Development Manager Mudlogging Multi-Client Services Services
1 and 2 man Mudlogging 7765 Windwood Way P.O. Box 549 Gas Referencing™ Parker, CO 80134 Geosteering USA
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Neil H. Whitehead, III Consulting Geologist PhD
CPG-AIPG
PG WY
Rocky Mountain Basins Wellsite to Petroleum Systems ArcGIS TM
303-679-8573
geokinetics.com
fax 303-679-8574
31634 Black Widow Way
Conifer, CO
neil3@q.com 80433-9610
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OUTCROP
Susan Spancers
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OUTCROP | May 2018
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Board of Directors meeting. In exchange for the funds, the RMAG Foundation has several requests for RMAG which the Board of Directors is discussing. The Long Range Planning Committee, chaired PetroFecta® from by Larry Rasmussen, and made up of past, current Fluid Inclusion and future presidents of RMAG are reviewing the five year strategicTechnologies plan, of which we are currently in year three. There wasapproach some combining discussion of nomiis a unique ® nations for the 2018 RMAG Professional Awards. If ), Trapped Fluid Analysis XRF (PDQ-XRF you know someone RMAG whoPhotography deserves recogHigh Resolution (FIS ®), andin ® ) of the entire wellbore from (RockEye nition for service to science or RMAG, exploration cuttings or earth core samples of anystudies, age. or discovery,well reporting science public service, or journalistic achievement, send your All analyses are conducted on the same nomination to Debby Sycamore, Committee Chair at 1 gram sample (up to 575 samples per well) sycamore777@comcast.net or (303) 881-0876 with with an analytical cycle of four days. suggestions by June 15, 2018. Last month’sData Name theonFormation provided a DVD with was a tricky one, but I had a fewpreviewer impressive outcrop scholars software. email me the correct answer. If you kept quiet, but guessed that the Mexican Hat is sculpted from the Halgaito Formation, you are correct! The structure in the background is the Raplee Anticline (extra credit answer). I hear Information the best about wayPetroFecta to enjoy ®these outcrops other FITwith services, is from atop a raft, and perhaps a cold beverage in call 918.461.8984 your hand. or visit www.fittulsa.com Even as the field season approaches, as I write, there is snow falling on my deck. So, for this month’s Name the Formation, we are traveling south to warmer latitudes as I did a few weeks ago on Spring www.rmag.org Break. This month’s Name the Formation comes from the last outcrop I got my hand lens on in Utah. This eolian Jurassic formation forms sheer, red, sandstone cliffs, often darkened with desert varnish. It crops out in the Four Corners Region and is perhaps best known for iconic outcrops in National Parks in southeastern Utah. The outcrop in the photo is from the San Rafael Swell and is adorned with pictographs that are over 2,000 years old. Name the Formation!
Vol. 67, No. 5 | www.rmag.org
Geo Train Trip to AAPG Ace, Salt Lake City F r o m
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D e n v e r
May 2018
Departs at 8:05am Arrives at 11:05 pm
Travel to AAPG Ace 2018 in style! Join RMAG members on a train trip from Denver to Salt Lake City. As the train passes through the Piceane Basin, the Uintah Basin, the edge of the Paradox Basin, and the Utah Thrust Belt, short geo talks will be given throughout the day.
Ticket Price - $115 Register at www.rmag.org This is a one-way ticket. Passengers will be responsible for planning travel back to Denver after AAPG ACE.
Sponsored By:
email: sta@rmag.org | phone: 303.573.8621 #1214, Denver, CO, 80202 Vol. 67,910 No.16th 5 | Street www.rmag.org
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fax: 888.389.4090 | web: www.rmag.org follow: @rmagdenver OUTCROP | May 2018
PRESIDENT’S LETTER By Terri Olson
Benefits of Volunteering colleagues outside of our own companies frequently cultivates new perspectives and new avenues to pursue. Looking at the rocks, at RMAG core workshops or field trips, is helpful for understanding concepts and seeing them applied as well as getting insight into particular reservoirs. A further advantage of being a volunteer is the opportunity provided to develop non-technical skills, such as leadership. Personally, I can attest that volunteering for RMAG—in my case starting with the Publications Committee—has opened doors. With RMAG, I eventually was First VP and Chair of the Publications Committee as well as co-editor of the
The Rocky Mountain Association of Geologists is largely a volunteer-driven organization. We could not function without our paid staff, but much of what we do is instigated by member volunteers. The Board of Directors is comprised entirely of volunteers, as are all the standing committees. The benefits of volunteering are many. Some are obvious and oft touted, such as building your professional network and giving back to an organization that provides resources for career development. Another that is often overlooked is access to ideas. Going to talks and chatting with
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LEADERS IN PETROLEUM GEOCHEMISTRY
Oil Geochemistry for the Geoscientist 2-Day Short Course Learn to describe the origin and history of individual oils! Wednesday/Thursday, 9&10 May 2018 Grand Hyatt Denver Harold Illich / Dr. John Curtis
CONTACT GeoMark FOR MORE INFORMATION
REGIONAL STUDIES - GEOCHEMICAL DATABASES – ANALYTICAL SERVICES WWW.GEOMARKRESEARCH.COM / DENVER - DR. JOHN CURTIS (303) 619-0372
OUTCROP | May 2018
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Vol. 67, No. 5 | www.rmag.org
AAPG ACE , Salt Lake City Short Course
Presented by the Rocky Mountain Association of Geologists
Petrography of Mudrock Hydrocarbon Reservoirs Saturday, May 19, 2018 | 8:00am - 5:00pm Instructors: Lyn Canter (Whiting Petroleum), Mark Longman (QEP Resources), David Hull (Devon), Joe Macquaker (ExxonMobil), Terri Olson (Digital Rock Petrophysics) This course is designed for geologists, petrophysicists and managers who desire a better understanding of mudrock reservoirs and the technology used to investigate their composition, evolution, and pore systems. This one-day course will focus on applications of pore-scale imaging techniques, with most of the time dedicated to case studies of unconventional oil and gas reservoirs. Quantitative as well as qualitative results will highlight the utility of various methods.
Register online at ace.aapg.org/2018/ email: sta@rmag.org
phone: 303.573.8621
Vol. 5 | #1214, www.rmag.org 91067, 16thNo. Street Denver, CO, 80202
fax: 888.389.4090 11
web: www.rmag.org
OUTCROP | May 2018 follow: @rmagdenver
PRESIDENT’S LETTER
POSITIONED FOR GROWTH With a proud legacy and an exciting future, QEP Resources is an industry leader in crude oil and natural gas exploration and production. We’re focused on some of the most prolific natural resource plays in the continental United States. These include two world-class crude oil provinces — the Permian and Williston Basins and two premier natural gas assets — the Haynesville Shale and the Uinta Basin.
Headquartered in Denver, Colorado, QEP is an S&P MidCap 400 Index member company (NYSE: QEP). Learn more at www.qepres.com.
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Outcrop and a special publication (“guidebook”) on the Piceance Basin. (Not to mention now being President.) Some of that pubs experience led me to volunteer with AAPG publications, where I was Vice-chair and then Chair of the AAPG Publications Committee, and have edited a Memoir. Even more to the point, my original contact with the RMAG Pubs Committee (herself a past RMAG president) was the connection that paved the way for getting a new job. Volunteer opportunities abound within RMAG, and we need you. The following committee descriptions are intended to show what the committees do and where help is needed. The Publications Committee is chaired by Stephen Sturm, who was First VP of RMAG last year. The board liaisons are David Katz (First VP) and Heather LaReau (First VP Elect and Chair of the committee next year). This committee has oversight of both periodical publications (The Outcrop and The Mountain Geologist) and special publications. They are charged with keeping the pipeline of future articles, papers, and books filled. They also take on special projects, such as assigning DOI numbers to past publications to increase their accessibility and visibility. Current members include all editors of RMAG publications. Additional volunteers would be welcome (especially but not limited to people interested in being an editor in the future). Contact Stephen Sturm, 303petro.images@gmail.com for information
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Vol. 67, No. 5 | www.rmag.org
May 30, 2018
2018
RMAG Golf Tournament
1:30pm Shotgun At Arrowhead Golf Club Registration includes entry, 18-holes of golf, cart, dinner, & entry to win great door prizes.
Registration is open! Teams of 4 and Individuals are welcome to register. Member Individual: $150 Non-Member Individual: $175
Member Team: $600 Non-Member Team: $700
email: sta@rmag.org
phone: 303.573.8621
Vol. 67, No. 5 | www.rmag.org
910 16th Street #1214, Denver, CO, 80202
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fax: 888.389.4090
web: www.rmag.org
OUTCROP | May 2018
follow: @rmagdenver
PRESIDENT’S LETTER critical to the continued health of our organization, and more volunteers are needed! Contact Brandy at brandbutler@comcast.net for more information. The On the Rocks Committee organizes RMAG field trips. It is chaired by Rob Diedrich, past RMAG Counselor; the board liaison is Jim Emme (RMAG Counselor). The committee has put together an excellent slate of field trips for this year—see the list elsewhere in this issue (or online at rmag.org under Events/Field Trips). (I’m planning to attend at least two, more if my schedule permits.) According to Rob, “While the planning in nearly done, the committee members will act as trip coordinators and we could always use some help. And we’ll start discussing next year’s trips in 4Q so we’d be glad to take on new members and they can contact me.” (rdiedrich@ sm-energy.com) The Educational Outreach Committee is newly reformed and is chaired by Danielle Ebnother.
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about joining this committee. The Continuing Education Committee is chaired by Cat Campbell, who was Second VP of RMAG last year, ably assisted by Tracy Lombardi, the current Second VP. This committee puts on numerous events each year such as short courses, core workshops, and symposia. They are also responsible for finding speakers for the monthly RMAG luncheons. The committee is functioning well, with numerous events planned, but volunteers to share the work of doing all this are much needed. The Membership Committee is chaired by Brandy Butler; the board liaison is Anna Phelps (RMAG Secretary). This committee has the critical responsibility to recruit new members. They run the Mentorship Program, which has over 20 mentor-mentee pairs this year. Given the changing demographics of our association, with baby boomers retiring and aging out, the work of this committee will be
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Providing geoscience expertise and technology to the field and office since 1981
Well Site Geology Geosteering - On site & Remote Rock Analytics Geologic Prognosis/Mapping Oil Field Safety Training - PEC Regulatory Representation
sunburstconsulting.com
406.259.4124 OUTCROP | May 2018
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Vol. 67, No. 5 | www.rmag.org
June 7, 2018 8:30am - 5:00pm
Location: LMKR GeoGraphix, Denver Register online at www.rmag.org. Member Price: $200 Non-Member Price: $250 Student/Unemployed Price: $175
2018 RMAG Spotfire Course Courtney Brown - Blue River Analytics
This course provides an introduction to one of the industry's gold standard data analytics software: TIBCO Spotfire. During the course we will cover loading industry data, as well as how to build visualizations and interact with the tool. Courtney has been with Blue River Analytics for 2.5 years providing Spotfire training and consultative services. Prior to Blue River Analytics she worked at TriZetto, A Cognizant Company as a Customer Success Lead. There she was responsible for her client's implementations, problem management, training and process improvement. Courtney holds a degree in Psychology and Economics & Organizational Management from Agnes Scott College.
email: staff@rmag.org phone: 303.573.8621 Vol. 67, No. 5 | www.rmag.org 910 16th Street #1214, Denver, CO, 80202
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fax: 888.389.4090OUTCROP web: www.rmag.org | May 2018 follow: @rmagdenver
PRESIDENT’S LETTER
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Caroline Charles is the Volunteer Coordinator; contact her if interested in being a speaker in schools (and beyond): caroline.charles@ weatherfordlabs.com. The Outreach Coordinator is Anita Thapalia, and the Materials Coordinator is Mel Klinger. Here is new information from the committee: In response to the 2017 RMAG Board of Directors’ desire to bring more geoscience information and learning opportunities to area schools and other interested parties, RMAG has rekindled the Speaker/Education committee, now named the Educational Outreach Committee. The mission of this committee is to provide fun and engaging educational Earth Science opportunities for K-12 students, and adults, within our communities. The educational content can be specified to audience interests and age, as well as educator goals and allotted time. To date, we have some lesson plans for grades 4 through 8 , and 9 through 12 , along with numerous mineral and rock samples, and a growing slide deck for constructing a grass-roots type of presentation on a variety of geoscience topics suitable for all ages. The committee can also provide presentations for adults in various settings, such as assisted living facilities, libraries, and more! The Educational Outreach Committee is in its beginning stages and needs members! As diverse as career options are for a degreed Geoscientist, we strive for its committee members to reflect this reality. To join this committee, you must first th
th
th
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Vol. 67, No. 5 | www.rmag.org
RMAG July Short Course
July 18-19, 2018 | 8:30am-4:00pm Denver Place (999 Eighteenth Street, Denver, Colorado 80202) Register online at www.rmag.org Member Price: $300 Non-member Price: $350 Student/Unemployed Price: $150
Geostatistics Course MICHAEL J. PYRCZ, Ph.D., P.Eng - University of Texas at Austin Class will be accessible to geoscientists and data scientists with no previous experience with geostatistics. We will build up from data integration to spatial estimation and simulation along with uncertainty modeling to support decision making. After completion the students will understand: (1) the benefits and uses of geostatistics, (2) the common spatial and uncertainty modeling workflows, (3) how to better integrate their domain knowledge into the geostatistical model.
email: staff@rmag.org
phone: 303.573.8621
910 16th Street #1214, Denver, CO, 80202
Short Course
fax: 888.389.4090 follow: @rmagdenver
web: www.rmag.org
730 17th Street, Unit B-‐1 Denver, CO 80202 303.825.5614 derlibrary@gmail.com derlibrary.com
Thank you to the RMAG May Short Course room sponsor!
OUTCROP | May 2018
PRESIDENT’S LETTER
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decide what your commitment can/will be: 1) conduct geoscience lessons in classrooms, or other specified venue, as a presentation volunteer; 2) be a coordinator and recruiter for presentation volunteers; or, 3) assemble instructional content and help develop basic lesson plans. This is an exciting opportunity to encourage interest and facilitate understanding of the geosciences! If you are interested in joining, volunteering, or requesting talks, please contact Committee Chair Danielle Ebnother at debnother@hotmail. com (303-815-7983) or staff@ RMAG.org.
The fall symposium is jointly hosted by RMAG and DWLS (Denver Well Logging Society). That committee is co-chaired by Ginny Gent for RMAG and Sam Fluckiger for DWLS. They have plans for this fall’s event underway, and are seeking speakers on the topic of What have we learned from unconventional reservoirs that could be applied in any petroleum system? Contact Ginny (ginny_ gent@eogresources.com) or go to the RMAG web site under Events/Workshops and symposia for more info or to submit an abstract. The Awards Nominations Committee is chaired by Deborah Sycamore, and is both seeking new members and taking nominations for professional awards. Contact Deborah at sycamore777@ 18
comcast.net or go to the RMAG website under Committees for more info. The Social Planning Committee is charged with organizing and volunteering at RMAG social functions throughout the year. This committee will plan the RMAG Golf Tournament, Sporting Clay Tournament, Ski Trip, Rockbuster’s Bash, and other social activities throughout the year. This is a new committee in 2018. In the past, each of these events had a separate committee. Now, the entire committee can participate in planning and organizing all events or break into sub-committees by event. This committee needs members! If you are interested in joining, or just have questions please contact our Membership and Events Manager, Hannah Rogers at hrogers@rmag.org. In summary, there are many advantages to volunteering with RMAG, not least of which is to expand your professional network in a meaningful way. The two areas most in need of volunteers now are Membership and Continuing Education, but any committee would welcome volunteers.
The soluHon for unique and valuable geological informaHon for prospect generaHon
Vol. 67, No. 5 | www.rmag.org
R M A G D I N N E R
S C O T T W. T I N K E R
email: staff@rmag.org
phone: 303.573.8621
Vol. 67, No. 5 | www.rmag.org
910 16th Street #1214, Denver, CO, 80202
07 26
The Chophouse Denver, CO
Register online at www.rmag.org Price - $55
Is Renewable Energy “Good’ and Fossil Energy “Bad” There is a narrative in the US and Western Europe that suggests renewable energy is clean, green and good, and fossil energy is dirty, black and bad. But is any form of energy, at scale, really good or bad, and is that even a useful construct when considering energy? That depends, of course, on what is meant by good and bad. If good means limited emissions at the generation source, then renewables, and nuclear, are good. On the other hand, if good means more land for nature, then the mining, manufacturing, capture and equipment disposal of intermittent, low density renewables and associated backup batteries is not so good. Perhaps good means lifting humans from poverty and maintaining healthy economies to keep the workforce employed and allow for economic investment in the environment. In that case, good is any form of energy that is available, affordable, and reliable, such as coal and oil. But that is changing, slowly. The future energy mix will vary by geopolitical region and be driven by economics, resource availability, politics, technology, and sustainability. Dr. Scott Tinker's passion—bringing academe, government, industry, and NGOs together to address major societal issues in energy, environment, and the economy—has led him to nearly 60 countries where he has presented 700 keynotes and invited lectures to government, industry, academia, and the public. Dr. Tinker is an AAPG Halbouty Leadership Medalist, GCAGS Boyd Medalist, a Fellow of the Geologic Society of America, and has been broadly awarded by AIPG, AGI, AAPG, and TIPRO for his successful efforts to engage the public in science.
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fax: 888.389.4090
web: www.rmag.org
OUTCROP | May 2018
follow: @rmagdenver
What RMAG Did For Its Members In 2017 -or-
Why You Should Be A Summit Sponsor For 2018! becoming good friends as well as professional peers. One thing that I’ve attempted to articulate is the number of events and publications that RMAG has to offer its members during a given year. There are symposia, core workshops, short courses, luncheons, field trips, social events, and a bevy of geologic literature. I’ve never tallied up all of these until this evening, and the list is impressive. If you’re looking for a good reason to join RMAG besides being the ‘right thing to do’, or beyond the networking opportunities, look no further than a list of everything that RMAG did for its members in 2017. I’d put this list up for comparison with what any other geological society in the country has to offer. Behold....
By Larry Rasmussen I’ve had a number of fellow geologists over the years question why they should become a member of the Rocky Mountain Association of Geologists. The answer used to be cut and dry. When you become a professional geologist, you join and support your local society. In my mind, that’s still a great and legitimate reason. Besides, it’s a bargain at $41 per year. There’s also the networking opportunities, the instant ability to approach a fellow geologist at an RMAG event, strike up a conversation and connect on a professional level. Ideas are shared and, in the ideal world, all parties come away intellectually enriched. Some of these connections last a career, and some end up
SYMPOSIA, CORE WORKSHOPS, SHORT COURSES: • February: 23rd Annual RMAG/DGS 3D Seismic Symposium – Recovery on the horizon • March: RMAG Core Workshop – Selected Rocky Mountain tight oil sandstone plays • September: RMAG/DWLS Fall Symposium – Geology and petrophysics of unconventional mudrocks • September: RMAG Core Workshop – Unconventional mudrocks • October: RMAG Core Workshop – Selected Rocky Mountain tight oil sandstone plays (redux) • November: RMAG Short Course – Sequence stratigraphic correlation using well logs, A hands-on training workshop
LUNCHEON TALKS:
• January: Pete Stark & Steve Trammel (IHS), Perpsective 2017 – Growth resumes while challenges abound OUTCROP | May 2018
• February: Christopher Laughrey (Weatherford), The Stable isotope and noble gas geochemistry of a high-nitrogen natural gas reservoir, northwestern Denver-Julesburg Basin • March: Richard Rosen (Consulting Geologist), Novel methods, concepts and applications of geomechanics for unconventional exploration and exploitation • April: Stephanie Gaswirth (USGS), Assessment of undiscovered continuous oil resources in the Wolfcamp Shale of the Midland Basin, Permian Basin Province, Texas, 2016 • May: Mark Millard (SM Energy), Seeing the forest for the tree: A simplified workflow for target optimization utilizing correlation matrices, An example from the Bakken Formation • June: Ned Sterne (Consulting Geologist), Stephen Cumella (Consulting Geologist), Bob Raynolds (Denver Museum of Nature and Science), John Miller (USGS Emeritus), James Granath (Granath and
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The Rocky Mountain Association of Geologists
2018 Sporting Clay Tournament
Registration is open! www.rmag.org
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September
Kiowa Creek Sporting Club • Prizes for individual high score and team 1st, 2nd and 3rd flights. • Includes one round of 100 sporting clays, lunch, and door prizes. • Does not include ammunition (please bring enough ammo for 100 clays or you may purchase ammo at Kiowa Creek). • You may also rent a gun for $20 onsite.
5 Person Team (member): $425 5 Person Team (non-member): $500 Individual (member): $85 Individual (non-member): $100
email: phone: 303.573.8621 Vol.staff@rmag.org 67, No. 5 | www.rmag.org 910 16th Street #1214, Denver, CO, 80202
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fax: 888.389.4090 web: OUTCROP | www.rmag.org May 2018 follow: @rmagdenver
WHAT RMAG DID FOR ITS MEMBERS IN 2017
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Associates), From mantle to mountain top: A restorable east-west transect across Colorado following Interstate 70 • July: Matthew Bauer & Michael Joseph Harty III (Colorado School of Mines), Induced seismicity in the Denver Basin prompts updated basement fault configuration model • August: David Wavrek (Petroleum Systems International, Inc.), Organic facies in petroleum system analysis • September: James Hagadorn (Denver Museum of Nature and Science), Colorado’s Paleozoic mass extinctions, Signals from slime, salts and fossils • October: Robert Coskey (Rose Exploration) & Stephen Cumella (Consulting Geologist), Thermal conductivity of organic shales and coals, How their presence and persistence effect thermal maturity • November: Zane Jobe (Colorado School of Mines), Applying scaling relationships to enable better reservoir prediction in submarine depositional systems • December: Reinaldo Michelena (iReservoir), Calibration and modeling of natural fracture properties using 3D poststack seismic data
ON THE ROCKS FIELD TRIPS:
• July: Fred Mark: Leadville mining district tour via bicycle • August: Steve Sonnenberg: Niobrara and Juana Lopez of the Front Range • August: Dennis Gertenbach & Donna Anderson: Ammonite fossil-collecting trip • September: Gus Gustason & Tofer Lewis: Codell-Niobrara Field Trip and Core Workshop
PUBLICATIONS:
• Dolan, M.P., D.K. Higley and P.G. Lillis, eds., Hydrocarbon source rocks in unconventional plays, Rocky Mountain region • Paleozoic and Mesozoic GIS data from the Geologic Atlas of the Rocky Mountain Region: Volume 1 • The Mountain Geologist: Published since 1964, The Mountain Geologist is the peer-reviewed, quarterly journal of the Rocky Mountain Association of Geologists (RMAG). • The Outcrop: The Outcrop is the monthly newsletter of the Rocky Mountain Association of Geologists. A regionally oriented publication, The Outcrop focuses on articles about association events, member activities and topics of interest, awards, and operations.
SUMMER BREAKFAST SERIES: • August 3: Mike Lewan, Mapping the extent and distribution of oil formation in the upper Bakken Formation, Williston Basin • August 10: Debra Higley, The Marcellus Shale, an unconventional perfect storm • August 17: Kristen Marra, Updated resource assessment of undiscovered, technically recoverable oil and gas within the Spraberry Formation, Midland Basin, Texas • August 24: Nick Jones, Overview of the Wyoming reservoir information tool, WyRIT • August 31: Ron Johnson, Recent work on the development of Green River Formation total petroleum system in the Uinta Basin, Utah
AWARDS:
Excellence for Teaching of Earth Science Award • Deborah Munson, Platteville Elementary School The Mountain Geologist Best Paper Award for 2016 • Sebastien Blanchard, Tracy D. Frank and Cristopher R. Fielding, Dolomitization of supratidal to shallow-marine carbonates in the Pennsylvanian successions of the Wyoming Shelf
SOCIAL EVENTS: • February: Annual RMAG/DAPL GeoLand Ski Day • June: Annual RMAG Golf Tournament, Arrowhead Golf Club • September: Annual RMAG Sporting Clay OUTCROP | May 2018
Tournament • October: RMAG/DERL Library Trivia Game at The Denver Earth Resources Library • November: Annual RMAG Rockbusters Bash
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RMAG DWLS Fall Symposium What have we learned from unconventional reservoirs that could be applied in any petroleum system?
The American Mountaineering Center
Email abstracts to
Ginny Gent
ginny_gent@eogresources.com
Sam Fluckinger
10 02 18
suckiger@sm-energy.com
email: sta@rmag.org
phone: 303.573.8621
Vol. 67, No. 5 | www.rmag.org
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fax: 888.389.4090
web: www.rmag.org
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follow: @rmagdenver
WHAT RMAG DID FOR ITS MEMBERS IN 2017 2017 SUMMIT SPONSORS:
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Best Talk of the Year Award for 2016 • Deborah King Sacrey, Unsupervised neural analysis of seismic attributes to find the ‘sweet spots’ in your data – with conventional and unconventional case histories
GOLD: • Anadarko SILVER: • Antero Resources • EnerPlus • PDC Energy • SM Energy
Honorary Membership Award • Marvin D. Brittenham Michael S. Johnson Explorer of the Year Award • Christopher B. Martin
Special Award • Dr. M. Raymond Thomasson • Carrie Veatch
BRONZE: • Anschutz • EOG Resources • RMAG Foundation • Columbine Logging • GeoMark • Bayle4ss • Tracker • Decollement Consulting, Inc. • Great Western • Schlumberger • Total Depth • The Discovery Group • Lario • Stephens Production Company • Whiting Petroleum Corporation • Encana • QEP Resources • Sunburst Consulting
President’s Award • Trisha Beaver
STUDENT SPONSOR: • Stoner Engineering LLC
Outstanding Scientist of the Year Award • Dr. Jeffrey A. May • Dr. Donna S. Anderson Geosciences in the Media Award • Lon Abbot & Terri Cook: Geology Underfoot Along Colorado’s Front Range Distinguished Service to RMAG Award • Dr. Paul G. Lillis • Ronald L. Parker Distinguished Public Service to Earth Science Award • USGS Core Research Center
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November 5-6, 2018
USGS - Denver Federal Center Register online at www.rmag.org Price: Member - $350 Non-member - $400 Student/Unemployed - $175
p o sh
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c & on i t s icla erizati c i t l r i A n S aract i e h g T nin oir Ch i a r n T eserv o s rR nd o a f H n Day criptio 2 A es D e Cor
Junaid Sadeque & Ali Jaffri This is a 2-Day course in which participants will learn the technical specifics of core-description evenly distributed between siliciclastic and carbonate environments. The primary objective of this hands-on core workshop will be to help participants learn how to identify facies and depositional environments from core-interpretation, and predict reservoir geometry and connectivity. The training will be accomplished through a combination of class-room lectures and hands-on core description sessions. Participants will learn the best practices/workflows for tying core-derived stratigraphic data with porosity-permeability, fluid properties, XRD and other relevant data for comprehensive reservoir characterization.
email: staff@rmag.org
phone: 303.573.8621
Vol. 67, No. 5 | www.rmag.org
910 16th Street #1214, Denver, CO, 80202
25EMAG v e n t Workshop Core
fax: 888.389.4090
web: www.rmag.org
OUTCROP | May 2018
follow: @rmagdenver
RMAG LUNCHEON PROGRAMS Speaker: Jeffrey A. May, PhD | May 2, 2018
Using Sequence Stratigraphy to Optimize Target Selection in Resource Plays By Jeffrey A. May, PhD, Geologic Consultant horizontal targeting based on sequence stratigraphic concepts. First, the importance of establishing accurate correlations based on flooding surfaces and parasequences is demonstrated for the Parkman and Baxter sandstones. Second, the significance of reservoir compartmentalization in highstand vs. falling stage systems tracts is described for the Viking, Woodbine, Sussex, and Frontier-Turner systems. Third, identifying different types of erosional surfaces and their impact on hydrocarbon production and the landing of laterals are highlighted for the Frontier-Turner and Bakken intervals. Finally, the significance of assessing vertical variations in reservoir and mechanical properties within a sequence stratigraphic framework are revealed for the Marcellus, Eagle Ford, Avalon, and Niobrara shales.
Sequence stratigraphy is not THE answer in optimizing the selection of horizontal targets in resource plays. But it is an extremely useful, and oftentimes necessary, tool that should be used when defining sweet spots and evaluating reservoir intervals. Sequence stratigraphy can aid subsurface geologic interpretation and evaluation in numerous ways. It (1) provides an increased understanding of depositional controls on reservoir vs. non-reservoir facies, (2) promotes better well-log correlations, (3) aids in reservoir prediction, (4) offers a framework for data integration, (5) guides sample collection from core, (6) delivers better reservoir flow models and volumetric calculations, (7) helps in choosing and staying within the target zone, and (8) furnishes input for completion design. This talk focuses on four aspects of optimizing
JEFFREY A. MAY received his B.A. in Geology from Earlham College, M.S. in Geology from Duke University, and Ph.D. in Geology from Rice University. He has worked in the oil and gas industry for over 30 years: as a research geologist with Marathon Oil Company (1981-1994); as a geological and geophysical consultant with Enron Oil & Gas (1994-1996) and GeoQuest Reservoir Technologies (1996-1998); as an exploration geoscientist with DDD Energy (1998-2001); and with EOG Resources beginning in 2001, first as Chief Stratigrapher and then as Chief Geologist, until his retirement in 2011. OUTCROP | May 2018
Jeff has conducted sedimentologic, sequence stratigraphic, and seismic stratigraphic projects on basins and fields worldwide. Areas of expertise include onshore and offshore Gulf of Mexico; onshore and offshore California; Uinta, Green River, Washakie, Denver, Powder River, and Williston Basins; northern and eastern Egypt; and Natuna Sea, Indonesia. At EOG, he provided regional to prospect-scale stratigraphic interpretation and evaluation plus training in support of all divisions. Jeff also conducts a variety of classroom and field seminars on clastic facies, deep-water sandstones, sequence 26
stratigraphy, and mudrock deposition and stratigraphy, most notably for the American Association of Petroleum Geologists, the Petroleum Technology Transfer Council, Nautilus Worldwide, many oil and gas companies, and universities. In addition, he has published numerous papers and abstracts on deep-water sandstones, sequence stratigraphy, geophysical interpretation, and mudrock deposition. Most recently, Jeff completed an AAPG Distinguished Lecture tour and was presented the best luncheon speaker award by RMAG for 2013.
Vol. 67, No. 5 | www.rmag.org
Rockbusters Bash 2018 Professional Awards Celebration
Join the RMAG for an evening of heavy hors d’oeuvres, drinks, a live auction, and most importantly, honoring professional award winners.
Ticket Price
$45/Person
11 08 18 4:30pm - 7:30pm | The Maven Hotel at the Dairy Block Details and registration can be found online at www.rmag.org. email: sta@rmag.org phone: 303.573.8621 Vol. 67, No. 5 | www.rmag.org
910 16th Street #1214, Denver, CO, 80202
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fax: 888.389.4090OUTCROP web: www.rmag.org | May 2018
follow: @rmagdenver
RMAG LUNCHEON PROGRAMS Speaker: Matt Silverman | June 6, 2018
Tiger Mike Davis: Denver Oilman, Las Vegas Legend, and the Toughest Boss in the World Matt Silverman
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Houston in 1975, and he built Tiger Drilling into a substantial rig, pipe and barge business in Louisiana over the next few years. After gambling extravagantly in Las Vegas and hob-knobbing with A-list celebrities there like Frank Sinatra, Johnny Carson and Joe Lewis, he moved to Sin City in the 1990s. Not all his bets were winners. Following an SEC investigation in the late 1970s, Davis filed for bankruptcy. A quarter-century later, he put billionaire investor Kirk Kerkorian into a drilling deal with Denver’s Delta Petroleum that failed. In 2012 Kerkorian and Davis privately settled lawsuits against each other. Mike Davis may have been best known for his notorious office memos, in which he provided infamous professional direction for his employees. Among his gems: “Do not speak to me when you see me. If I want to speak to you, I will do so.” And “Don’t take advantage of me, because I am going to be looking down your throat. You need the job – I don’t!” He died in 2016 at 85 from complications of prostate cancer. At the memorial service, one mourner told the bereaved, “Mike Davis put the F.U. in funeral.”
Born in rural hard times during the Depression and without a high-school education, Edward “Tiger” Mike Davis became one of the richest, most colorful oilmen in America. Tiger Mike’s story is hard to tell without four-letter words, as his swearing was the stuff of legends. No G-rated abstract can do him justice. In 1947 he dropped out of high school in Nebraska and joined the Army. After serving in Europe he came to Denver, driving trucks and “swamping” in bars until lightning struck. He answered a blind ad for a chauffeur in 1956 and became the driver for Helen Bonfils, a fashionable socialite and heir to the Denver Post fortune. In 1959 Davis (28) married “Miss Helen” (69), and she set him up in the oil business. Not long thereafter he began a lifelong love affair with Phyllis McGuire, youngest of the pop trio, The McGuire Sisters, most famous for their #1 hits Sincerely and Sugartime. “Miss Phyllis” was also involved at the time with Sam “Momo” Giancana, heir to Al Capone as Boss of the Chicago Mob. Pugnacious and generous, profane and shrewd, above all Mike Davis was a wildcatter. Among his greatest financial successes were the sales of his oil and gas assets in the Rockies, including his interests at Bell Creek, MT (1967); Red Wing Creek, ND (1972); and Spotted Dog, CO (2007). He was thrilled by the chase and the gamble, but never one to hang on to a producing asset for long. Davis and Helen Bonfils divorced in 1971. Tiger Oil Company’s headquarters moved to
Matt Silverman was RMAG’s President in 2014 and is Exploration Manager for Robert L. Bayless, Producer in Denver. He also serves as Chair of AAPG’s History of Petroleum Geology Committee. The subject of this presentation, Edward “Tiger Mike” Davis, was legendary for his wildcatting and his profanity, so Parental Guidance is advised. 28
Vol. 67, No. 5 | www.rmag.org
Applied Learning-PTTC Workshops Petrophysical Evaluation of Unconventional Reservoirs – AAPG Convention Thursday, May 24, 2018, 8:00 am – 5:00 pm, Salt Lake City, Utah Fee: $300, includes lunch, class notes, and PDH certificate Instructor: Jack Breig
The course will cover the petrophysical approaches to the evaluation of Shale Oil, Tight Gas Sands, and Shale Gas Techniques using both open and cased hole logs. Attendees will learn basic interpretation procedures to determine porosity, hydrocarbon saturation, TOC, volumes of in-place hydrocarbons, recoverable hydrocarbon estimates, and net pay criteria. Worked examples from a number of North American reservoirs will be part of a comprehensive workshop manual to be provided to all attendees.
Applied Concepts in Naturally Fractured Reservoirs Wednesday-Thursday, June 13-14, 2018, Location: Colorado School of Mines, Berthoud Hall rm. 243 Fee: $500, includes snacks, class notes, and PDH certificate Instructor: John Lorenz and Scott Cooper
This is a hands-on class anchored with a 65-piece plus teaching collection of natural and induced fractures in core that students will work with during class exercises. The class provides insights into fracture mechanics and the origins of fractures, and uses those concepts in a very applied sense to instill an understanding of natural fractures and their potential effects on reservoirs. Discussions, lectures and exercises include differentiating fractures by type and the effects of different fracture types on reservoir permeability, and the fracture types expected in different structural domains and reservoirs. Course modules also include how to differentiate natural from induced fractures in cores and the use of image logs and their calibration with core. We will also discuss the interactions between natural fractures, in situ stresses, and stimulation fractures. Students will come away from the class with an appreciation of the wide range of structures that fall under the basket term “fracture”, and an understanding that different fracture types do not have the same effect on hydrocarbon reservoirs.
Volumes and Risks Assessment for Conventional and Unconventional Plays and Prospects Tuesday-Thursday, August 7-9, 2018, Location: Colorado School of Mines, Berthoud Hall rm. 403 Fee: $750, includes snacks, class notes, and PDH certificate Instructor: Dr. Alexei Milkov, Colorado School of Mines, Geology Dept.
Students learn to translate geological knowledge into sound and realistic numbers and ranges for consistent assessment of volumes and risks in exploration projects (plays, segments, prospects, wells). Obtained learnings will help participants to successfully evaluate the geological probability of success for exploration prospects and to assess the range and distribution of petroleum volumes in case of success. As these skills are required for every geoscientist working in oil & gas industry, students will prepare for employment in the industry. The transfer of instructor’s practical knowledge of most important and relevant theories, tools, and approaches used in the industry is done through lectures, individual and group exercises, projects and an exciting oil exploration game. At the completion of this course students should be able to 1) Use Play Based Exploration approach and tools to locate sweet spots in conventional and unconventional plays and assess remaining play/basin potential, 2) Calculate deterministic potential (success-case) petroleum resources in conventional prospects and in unconventional plays, 3) Assess geological risks and probability of success (PoS) for conventional and unconventional exploration prospects, 4) Use industry-standard software (GeoX) and run Monte-Carlo simulations to estimate unrisked and risked probabilistic volumes for exploration plays, segments, prospects and wells, 5) Recognize biases and logical fallacies common in exploration assessments and know how to correct them, 6) Aggregate segments into a prospect and prospects into a drilling portfolio, accounting for dependencies, 7) Evaluate drilling results to establish main reason(s) for well failure.
Class Descriptions and Register Online: www.pttcrockies.org For more information, contact Mary Carr, 303.273.3107, mcarr@mines.edu
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MINERAL OF THE MONTH By Ronald L. Parker, Senior Geologist, Borehole Image Specialists, 5650 Greenwood Plaza Boulevard, Suite 142, Greenwood Village, CO 80111 ron@bhigeo.com
TITANITE The Wedge-Shaped Timepiece
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Cluster of many intersecting translucent brown titanite crystals fully crystallized on all surfaces with no matrix from Bear Lake Diggings, Tory Hill, Ontario, Canada. Several of the titanite crystals have rough areas on the edges where they intersected other nearby crystals. Ex. Bill Plavac collection #2743. Used with permission from John Betts Fine Minerals.
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MINERAL OF THE MONTH: TITANITE
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were Mnemosyne, Tethys, Theia, Phoebe, Rhea and Themis. The male Titans include Kronos, Oceanus, Iapetus, Coeus, Hyperion and Crius. The descendant (2nd and 3rd) generations of Titans also sport names that permeate geology: Helios, Eos, Atlas, Prometheus, Zeus, Hades and Poseidon]. Titanite was previously known as sphene and that name is ensconced in the older literature. The name “sphene” was coined by Rene Hauy, in 1801. Sphene derives from the Greek, “sphenos”, which translates to
Titanite, CaTiO(SiO4) also commonly reported as CaTiSiO5 - is a common accessory mineral in many types of igneous and metamorphic rocks. Also known as sphene, a name that has fallen out of favor, this calcium titanium nesosilicate is an important reservoir in the titanium geochemical cycle. Titanite has a distinctive crystal form that it flaunts, commonly appearing as recognizable wedgeshaped crystals. Titanite has a dispersion value that gives it a high luster, lending some crystals an intense brilliance and fire. Because it is comparatively soft, it is not well-suited to jewelry, but can be a prized mineral specimen for collectors. On top of it all, the calcium coordination site is sometimes occupied by other cations, most famously, uranium. This, combined with a high temperature of crystallization and a low diffusivity for lead (Pb), make titanite one of the most important minerals for U/Pb geochronology. Because titanite is a central contributor to quantitative thermometry and barometry, it has played a critical role in deciphering igneous, metamorphic and ore-forming processes. Titanite is a titan among minerals! The name of the mineral titanite is an obvious reference to the element titanium contained therein.
Titanium was discovered in 1791 from ilmenite (FeTiO3) ore in 1791 by William Gregor and 1st named by Martin Klaproth, also in 1791, for the Titans of Greek mythology (Chaline, 2012). Martin Klaproth was also the one to apply the name titanite, in 1795. [The Titans were the 2nd generation of divine beings descended from the primordial deities Uranus (Father Sky) and Gaia (Mother Earth, for whom the science of geology is named). The Titans were twelve: six daughters and six sons, with a few names that are familiar to all geologists. The female Titans
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MINERAL OF THE MONTH: TITANITE
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“wedge” (Bonewitz, 2005). In 1982, the International Mineralogical Association (IMA) recommended that official use of titanite replace the name sphene. In spite of being discredited, sphene is still an informal label amongst geoscientists and it is frequently encountered in the gem and mineral trade (Kohn, 2017). Titanite has a hardness of 5 to 5½, a specific gravity of 3.4 to 3.6 and distinct cleavage on {110}. Titanite is monoclinic (2/m) and euhedral crystals commonly display a wedge-shaped exterior by intersection of the common forms {100}, {001}, {110} and {111} (Klein, 2002). Titanite crystals are often flattened parallel to the c-crystallographic axis {001} and twinning is most often observed on {100}, yielding contact or penetration twins (Johnsen, 2002). Wenk and Bulakh (2004) show a photo of titanite penetration twins that superficially resemble staurolite iron crosses. The axial lengths Titanite, Tory Hill, Haliburton County, Ontario, Canada, 3 cm x 2.9 cm x 1.4 cm, of titanite are a=6.56Å, b=8.72Å and Jamison Brizendine Collection #944.jpg. Photo by Jamison Brizendine. c=7.44Å for an axial ratio (a:b:c) of 0.752 : 1 : 0.853. The β angle (between the a and c crystallographic titanite is harder than sphalerite and softer axes) is 119.43°, giving titanite a decidedly “inthan staurolite (Klein, 2002). clined” character. This factor is central to the Titanite is a nesosilicate, in which isolated wedge-like appearance (Klein, 2002). silica tetrahedra (SiO44-) are bonded to cations Titanite is usually brown, but can be yellow, or anionic groups, not to other silica tetrahegreen or gray. Titanite has a resinous, brightly dra. In the case of titanite, the isolated silivitreous or adamantine luster, and this is one ca tetrahedral are bonded to a kinked chain of its diagnostic properties (Johnson, 2002). of corner-sharing TiO6 octahedra that paralIn fact, titanite is among the very few minerals lel the a-crystallographic axis (Klein and Philthat enjoy a larger color dispersion than that potts, 2013). Calcium ions occupy relatively of diamond (Bonewitz, 2005). Faceted titanite large cavities with (unusual) 7-fold coordinacrystals are noted for a fiery brilliance, a chartion (Johnson, 2002; Kohn, 2017). Substituacter that makes titanite a valued addition to tion of the cationic site includes Na+ and the a mineral collection. Unfortunately, titanite is middle rare-earth elements (MREEs). Substiusually too brittle and too soft for use in jewelry (Bonewitz, 2013). Titanite can be discrimtution for titanium may include Al, Fe, Mn, Mg, inated from look-alike minerals by hardness: »»CONTINUED ON PAGE 34
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MINERAL OF THE MONTH: TITANITE
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Titanite, Capelinha, Minas Gerais, Brazil, 13 cm x 5 cm x 3 cm, Anne Cook Collection #12099. Photo by Jamison Brizendine.
Titanite is a common accessory mineral in felsic and intermediate plutonic igneous rocks including granites, granodiorites, diorites, syenites and nepheline syenites (Klein, 2002; Johnsen, 2002). It is also found in pegmatites and in metamorphic rocks enriched in Ti and Ca, including gneisses, metabasalts, chlorite schists, marbles, skarns and pyroxenites (Klein and Philpotts, 2013). Titanite appears in evolved gabbroic rocks and “…is, therefore, widespread in oceanic crust.” Titanite sheds light on processes of crystallization and metasomatism under different conditions of pressure, temperature, oxidation state and hydrothermal fluid chemistry (Colwell et. al., 2011). Titanite is also sometimes observed in the accessory mineral suite of sandstones (Nesse, 2004). Other
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minerals commonly associated with titanite include albite, chlorite, epidote, apatite, allanite magnetite, ilmenite, biotite, diopside, oxides, pyroxene, amphiboles, scapolite, and quartz (Klein, 2002). Titanite has commercial value as a source of titanium, but deposits with enough titanite are rare (Klein and Philpotts, 2013). Titanium is used primarily as a metal and as a pigment. Titanium metal is well known as a material with a superior strength to weight ratio and corrosion resistance. These characteristics have made titanium the most important metallic component in aeronautical and aerospace applications. Sputnik 1 (1957), Vostok 1 with the 1st human in space (Yuri Gagarin, 1961) and all subsequent space flight vehicles, have
Nb and Zr (Klein and Philpotts, 2013, Johnsen, 2002). Although zirconium (Zr4+) substitution clearly occurs at the Ti4+ octahedral sites, some of the other substitutions, niobium (Nb5+) and tantalum (Ta5+), for instance, are more complicated (Liferovich and Mitchell, 2005). Titanite embodies a unique suite of optical properties. Titanite enjoys extremely high birefringence (2.0) and refractive index (1.3) values (Wenk and Bulakh, 2004). When observed in thin-section under plane-polarized light, titanite is easily seen due to its very high positive relief. The high birefringence makes titanite crystals appear the same brown color in plane-polarized and cross-polarized light (Klein and Philpotts, 2002). Euhedral or subhedral titanites, under most orientations in thin-section, are distinctive as diamond or wedge-shaped crystals. These characteristics make titanite a favorite of optical mineralogy and petrography students. As Wenk and Bulakh (2004) state, titanite “…cannot be mistaken in thin-section.” (p. 437).
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MINERAL OF THE MONTH: TITANITE
Thank you to the RMAG July Short Course room sponsor!
OUTCROP | May 2018
depended upon titanium structural elements and engine parts. Today, titanium is used for more mundane applications like hightech bicycle frames and, because it is biologically inert, is finding widespread application in medicine as artificial joints, heart valves, pacemakers and dental implants (Chaline, 2012). Titanium dioxide (TiO2) is used widely as a bright white pigment in paints and coatings, papermaking and plastics. Other industrial uses for titanium include enamels, glassmaking, ceramics, catalysts, welding and electronics (Chang, 2002). One of the most interesting characteristics of titanite is its strength as a thermobarometer. It is especially useful because it preserves information at the high-end of the temperature range (~600°C to 1000°C). In 2006, Hayden, Watson and Wark established that the relative concentration of Zr4+ in synthetic and natural titanite is systematically related to pressure and temperature conditions. Since this work, the “Zrin-Titanite” thermobarometer has been demonstrated to be a robust tool with a large temperature and pressure range that finds application in a wide variety of rocks and tectonic settings (Kohn, 2017). In addition to thermobarometry, titanite is also a reliable geochronometer. Although zircon is the rock star of the U-Pb dating world, titanite - along with monazite and baddeleyite - form a strong second line 36
(Dickin, 2005). Titanite is useful for geochronology because it is widespread, it incorporates uranium into its crystal lattice (substituting for Ca2+), and it has a high closure temperature for Pb and other cations (Frost et. al, 2001; Engi et. al., 2017). Development of titanite as a geochronometer was first accomplished by Tilton and Grunenfelder in 1968. Since, titanite has been used to date many igneous and metamorphic rocks in diverse orogenic settings (Kohn, 2017; Dickin, 2005). Initial work on dating titanites concluded that Pb diffusivity is high above ~600°C, suggesting that titanite dates reflect cooling, not crystallization events. More recent work shows that Pb diffusivity in titanite is 2-4 orders of magnitude slower than previous experimental estimates, expanding the versatility of titanite as an archive of processes in the middle crust (Kohn and Penniston-Dorland, 2017). Linked to thermobarometry, titanite geochronology provides information about the P-T-t evolution of rocks in orogenic belts, a power enjoyed by very few mineral species (Engi et. al., 2017). Important localities for titanite include the Kola Peninsula of Russia, where it is mined for titanium from a nepheline syenite. Other important localities include Austria, Madagascar, Canada, Mexico, Brazil, Sweden, Germany, Russia, Pakistan, Switzerland, Italy and Norway. In the U.S. titanite is found in abundance in the Adirondacks and
Thank you to the RMAG June Spotfire Course room sponsor!
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MINERAL OF THE MONTH: TITANITE
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Adirondack lowlands of Upstate New York, in New Jersey and in Riverside, California (Klein, 2002; Johnsen, 202; and Bonewitz, 2005).
WEBLINKS:
• http://www.minerals.net/ mineral/titanite.aspx • https://en.wikipedia.org/wiki/ Titanite • https://www.mindat.org/min3977.html • http://www. handbookofmineralogy.org/ pdfs/titanite.pdf • http://webmineral.com/data/ Titanite.shtml#.Ws0hBYgbOHs • https://geology.com/minerals/ titanite.shtml
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REFERENCES: Bonewitz, Ronald Louis, 2005, Gem and Mineral: The Definitive Guide to Rocks, Minerals, Gems and Fossils, New York, New York: Dorling-Kindersley Limited, 360 pp. Chaline, Eric, 2012, Titanium, in Fifty Minerals that Changed the Course of History, Buffalo, New York, Firefly Books, Inc., pp. 198-201. Chang, Luke L.Y., 2002 Industrial Mineralogy: Materials, Processes and Uses, Prentice Hall: Upper Saddle River, New Jersey, 472 pp. Colwell, L. E., B. E. John, M. J. Cheadle and J. L> Wooden, 2001, Chemistry of Titanite (Sphene) in Ocean Crust: A Tool for Understanding Late-Stage Igneous and
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MINERAL OF THE MONTH: TITANITE Petrochronology, Chapter 13 in Petrochronology: Methods and Applications, Reviews in Mineralogy and Geochemistry, Volume 83, ed. by. Matthew J. Kohn, Martin Engi and Pierre Lanari, Mineralogical Society of America pp. 419-442. Kohn, Matthew J. and Sarah C. Penniston-Dorland, 2017, Diffusion: Obstacles and Opportunities in Petrochronolgy, Chapter 4 in Petrochronology: Methods and Applications, Reviews in Mineralogy and Geochemistry, Volume 83, ed. by. Matthew J. Kohn, Martin Engi and Pierre Lanari, Mineralogical Society of America pp. 103-152. Liferovich, Ruslan P. and Roger H. Mitchell, 2005, Composition and Paragenesis of Na-, Nb- and Zr-Bearing Titanite from Khibina, Russia, and Crystal Structure Data for Synthetic Analogues, The Canadian Mineralogist, 43: 795-812. Nesse, William D., 2004, Introduction to Optical Mineralogy, 3rd Edition: New York: Oxford University Press, 348 pp. Tilton, G. R. and M. H. Grunenfelder, 1968, Sphene: Uranium-Lead Ages: Science, 159: 1458-61. Wenk, Hans-Rudolf and Bulakh, Andrei, 2004, Minerals – Their Constitution and Origin: New York: Cambridge University Press, 646 pp.
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Metasomatic Processes at Mid-Ocean Ridges, Abstract V11A-2493 presented at 2011 Fall Meeting, AGU, San Francisco, Ca. Dickin, Alan P. 2005, /radiogenic Isotope Geology, Cambridge, U.K.: Cambridge University Press, 492 pp. Engi, Martin. Pierre Lanari and Matthew J. Kohn, 2017, Significant Ages – An Introduction to Petrochronology, Chapter 1 in Petrochronology: Methods and Applications, Reviews in Mineralogy and Geochemistry, Volume 83, ed. by. Matthew J. Kohn, Martin Engi and Pierre Lanari, Mineralogical Society of America pp. 1-12. Frost, B., Ronald, Kevin R. Chamberlain and John C. Schumacher, 2001, Sphene (Titanite): Phase Relations and Role as a Geochronometer, Chemical Geology 172(1-2):131-148. Hayden, Leslie A., E. Bruce Watson and David A. Wark, 2008, A Thermobarometer for Sphene (Titanite), Contributions to Mineralogy and Petrology, 155(4): 529-540. Johnsen, Ole, 2002, Minerals of the World: Princeton University Press, Princeton, N.J. 439 pp. Klein, Cornelis, 2002, The 22nd Edition of the Manual of Mineral Science: New York, John Wiley & Sons, Inc., 641 pp. Klein, Cornelis, and Anthony Philpotts, 2013, Earth Materials: Introduction to Mineralogy and Petrology, Cambridge University Press, 536 pp. Kohn, Matthew J., 2017, Titanite
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Recipients of the RMAG Foundation Awards for Excellence in Earth Science at the Colorado Science and Engineering Fair: (pictured left to right) Julia Warnock, Casey Shaw, Kathryn Kummel, and Michelle Kummel. Not pictured: Stella Addis.
RMAG Foundation Names Excellence in Earth Science Award Recipients Julia Warnock: Structural Geology of the Fountain Formation in Lory State Park (awarded $250) Stella Addis: Salty Studies (awarded $125)
SENIOR DIVISION
Kathryn Kummel and Michele Kummel: Using 3D 42
Drone-Based Digital Models to
OUTCROP | May 2018
JUNIOR DIVISION
The RMAG Foundation participated in the Special Awards Judging at the Colorado Science and Engineering Fair in Fort Collins on April 5. The RMAG Foundation awarded two Junior Division and two Senior Division awards for Excellence in Earth Sciences. RMAG members Anna Phelps, Laura Wray, Dick Louden and Lisa Reeves judged on behalf of the RMAG Foundation.
Investigate the Fluvial Geomorphology of an Eroding Arroyo (each awarded $250)
Casey Shaw: An Analysis
of Compositional Characteris-
tics of Two Distinct Fossil Butte Member Localities (awarded $125)
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WELCOME NEW RMAG MEMBERS!
Courtney Beck
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is a Geologist at Halliburton in Denver, Colorado.
is a Geologist at Encana in Denver, Colorado.
is a Student Geologist in Denver, Colorado.
is a Research Assistant/Graduate Student at Indiana University, Indiana Geological Survey in Bloomington, Indiana.
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is a Geologist at Earth Science Agency in Denver, Colorado.
worked at ExxonMobil - Retired in Estes Park, Colorado.
is a Geologist I at Wyoming Department of Transportation in Cheyenne, Wyoming.
is a Regional Survey Manager at Percheron, LLC in Arvada, Colorado.
lives in Evergreen, Colorado.
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Arthur French
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Gary Gable
Lesli Wood
Paul Glombick
is a Manager, Geology at Rimrock Oil & Gas in Greenwood Village, Colorado.
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RMAG Foundation
offers thanks to ‘Friends of Bob Cluff Society’ The RMAG Foundation Trustees wish to express their profound thanks to the following people who contributed over $60,000 to establish the Robert M. Cluff Scholarship for Petrophysics and/ or Reservoir Characterization. Now known as members of the “Friends of Bob Cluff Society”, their generosity allows the Foundation to give the first scholarship next year in memory of Bob. This is not only a fitting tribute to Bob’s memory and esteemed position as a geologist and volunteer, but an outstanding example of our community’s generosity. THANK YOU. —Donna Anderson, Tanya Inks, Kurt Reisser, Mitchell Reynolds, John Robinson, David Taylor, and Laura Wray RMAG FOUNDATION TRUSTEES
FRIENDS OF BOB CLUFF SOCIETY Donna Anderson Charlie Bartberger Dudley Bolyard Lou Bortz Marvin Brittenham Elmo Brown Sue Cluff Lisa Corbin Jeff May Marshall Crouch Steve Cumella John Curtis Bill Donovan Jim Emme Dolores & Albert Erlebacher Jane Estes-Jackson Robert Groth Tanya Inks Laura Johnson
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Shere Kahn Duff Kerr Robert Kozarek Mark Longman Brenda Miller Mike Miller Jim Mullarkey Catherine Murphy Peter Northrop Terri Olson Ira Pasternack Ron Pritchett Kurt Reisser Mitchell Reynolds
44
John Robinson J Frederick Sarg Tim Schowalter Matt Silverman J. Todd Stephenson John Stowell Robin Swank Debby Sycamore David Taylor Jeff Ware Melanie Westergaard Laura Wray Denver Well Logging Society Flagg Diamond Corporation Gavlin Family Foundation QEP Resources SM Energy Western Union Foundation WPX Energy
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IN THE PIPELINE MAY 2, 2018
MAY 15, 2018
RMAG Luncheon. Speaker: Jeffery May. “Using Sequence Stratigraphy to Optimize Target Selection in Resource Plays.” Maggiano’s Little Italy in Denver. Contact: staff@rmag.org
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MAY 9, 2018
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RMAG Short Course. Speaker: Andy Duncan. “Fundamentals of Borehole Imaging Applications in Conventional and Unconventional Reservoirs.” The Denver Place- 999 Eighteenth Street, Denver, Colorado 80202.
RMAG Geo Train from Denver to Salt Lake City.
MAY 10, 2018
MAY 20-23, 2018
RMAG On the Rocks Field Trip. Edgar Mine Tour. Idaho Springs, CO.
AAPG Convention. Salt Lake City, UT.
MAY 11, 2018
MAY 24, 2018
DIPS Luncheon. Members $20 and Non-members $25. For more information or to RSVP via email to kurt. reisser@gmail.com.
PTTC Rockies Short Course at AAPG Convention. “Petrophysical Evaluation of Unconventional Reservoirs.” Salt Lake City, UT. For more information see ace.aapg.org
RMAG Short Course at AAPG Convention. “Petrography of Mudrock Hydrocarbon Reservoirs.” Salt Lake City, UT
MAY 30, 2018 RMAG Golf Tournament. Arrowhead Golf Club. Shotgun: 1:30 PM. Dinner and awards following event.
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LEAD STORY
Historical Analysis of the Real Global Price of Oil By William D. DeMis, President, Rochelle Court, LLC, Houston Texas
nominal price declines in 1986 and 2014. A commodity analysis corroborates this exchange rate analysis. Gold and oil prices have historically tracked closely over the OPEC era. But from 1986 to 2000, and after 2014, this relationship became decoupled. During these decoupled periods, oil was undervalued relative to gold. In the absence of significant changes in the US dollar’s value, or profound changes in oil supply, the price of oil will most likely trade in a RGP range of $3046/bbl, or $45 to $70 in nominal prices. The probability that the nominal price of oil will drop below $40/bbl or rise above $80/bbl is low. If the US dollar’s value were to drop by 25%, the nominal price of $80/bbl would be at the low end of the current RGP trading range. If oil prices cross the low side of the RGP trading range, history has shown that OPEC (and sometimes non-OPEC) countries collaborate to force up nominal prices to regain purchasing power.
ABSTRACT The Real Global Price (RGP) of oil is the price of oil corrected for inflation and for changes in the value of the US dollar on global currency markets. The RGP of oil is a superior measure of oil’s value because it measures oil’s purchasing power with respect to OPEC. The US dollar’s value has fluctuated as much as 45% on global currency markets after the U.S. abandoned the Bretton Woods system in 1971. Key OPEC countries obtain 60-90% of their revenue from oil sales that are almost exclusively traded in US dollars. Changes in the RGP of oil can have a profound effect on OPEC’s purchasing power. An historical analysis of the RGP of oil over the OPEC era shows that in 1973, 1979, and 1995, OPEC reacted to a low US dollar with nominal price increases, supply cuts, and/or openly suggesting abandoning the dollar. When the RGP was low enough, non-OPEC countries collaborate with OPEC to push up the nominal price (e.g., Mexico and Norway in 1998; Russia and others in 2016). OPEC has overcorrected nominal oil prices when oil supplies were tight. From 1974-1985, and 2005-2014, oil was over-valued in a RGP analysis. These two RGP spikes ultimately led to reduced demand, new competing oil supplies and
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INTRODUCTION
Commodities, with rare exceptions, are contracted for and traded in US dollars around the world. The dollar-denomination of crude has long been transparent to Americans because they live in a “dollar bubble.” Exchange rate variations
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SHUTTERSTOCK.COM
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of the greenback are not felt by Americans until the price of gasoline goes up, and then the price change is blamed on OPEC, or “greedy” oil companies. However, changes in the US dollar’s value have had a profound effect on OPEC (e.g., Salman, 2004). OPEC has reacted to changes in the value of the US dollar since 1971 with nominal price increases, production cuts, and calls to abandon the US dollar as a basis for pricing oil (Platt’s Oilgram News, 1995; DeMis, 2000). After supply-and-demand balance, the single biggest driver of OPEC’s actions has been the changing value of the US dollar. Many geoscientists today are familiar with the inverse relationship between the US dollar’s value and oil pricFIGURE 1: Oil prices throughout OPEC era. Horizontal axis is time; es. This inverse relationship (and most 1960-February, 2018 for this and other figures. Nominal price is in dollars geoscientists’ awareness of it) has only of the day (DoD) - it is not corrected for anything. The “real” price is the come about in the last dozen years. Albeprice of oil corrected for inflation to a 2016 base, using the US CPI. The “real” price is extensively used in oil industry literature for this global it, before 2005, OPEC’s reactions to losscommodity (e.g., BP, 2017) es in purchasing power from declines in the US dollar have been anything but subtle (e.g., DeMis, 1996). points 2 and 3 are wrong. The point of this paper is Economists show two data series when disfallacy number 1. The US dollar’s value has fluctuatcussing value: nominal prices and “real” prices ed wildly since the end of the Bretton Woods system (Figure 1). The nominal price is the price in dollars in 1971 (Figure 2). of the day (DoD) - it is not corrected for anything. The Real Global Price of oil corrects for both inThe “real” price is the price corrected for inflation, flation and for variations in the US dollar on global usually using the US consumer price index. Even tocurrency markets. This is a superior measure of oil’s day, key industry publications like BP’s Statistical Revalue because it measures oil’s purchasing power view of World Energy (BP, 2017; their unnumbered with respect to OPEC. This paper traces the histofigure on page 20) still show a spurious historical oil ry of the Real Global Price over the OPEC era. A RGP price series using “real terms”, corrected using the analysis allows for a better understanding of OPEC American consumer price index! They do not acpast actions, and allows for better prediction of longcount for profound changes in the value of the US term oil value trends. Although supply-demand facdollar after the Bretton Woods system ended. tors cannot be excluded. The fallacies of using uncorrected “real” price data for analyzing historical oil price behavior inLITERATURE REVIEW clude: 1) the US dollar’s value has been constant on A computer search of “exchange rates and oil global currency markets; 2) the US consumer sets prices” produces a torrent of papers that fall into two the price of oil, and; 3) the oil market is entirely internal to the US. Upon inspection, any reader knows CONTINUED ON PAGE 49
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types: classical economic papers and non-economic papers.1 A review of classic economic literature would fill 3 volumes of “The Outcrop.” A limited review of classic economic papers is provided. Trehan (1986) early but obscure work uses vector analysis to show that drops in the US dollar’s value lead to oil price increases. He concludes with the bizarre statement that his analysis “…is not meant to deny a role to OPEC. … it is difficult to believe that OPEC does not take the value of the dollar into account when setting the dollar price of oil” (emphasis added). Even a casual reader has to question why the author speculates about OPEC’s regard for the greenback. FIGURE 2: “Real” price of oil and value of the US dollar. Percent changes in During the period included in Trehan’s the value of the US dollar are relative to the 1970 base. After the Bretton (1986) analysis, there was a plethora of Woods system ended, the value of the US dollar has floated, and vexed comments by OPEC oil ministers about OPEC. Drops in the value of the US dollar have eroded OPEC buying power; the eroding US dollar. For example, a fact not shown on a common “real” price analysis. Iraq’s oil minister is quoted in the New York Times in 1977: “Although we sell a barrel of crude oil for $13, its effective purchasing power is no more than $5.” exchange rate and not vice versa” (emphasis addOPEC’s focus on the dollar’s value was broadcasted ed). They do not cite Trehan (1986). The authors in New York Times articles2, non-economic papers do not include any OPEC press releases, or “gripes” (e.g., Eaker, Mark, 1979), and fee-based information from OPEC oil ministers about the low US dollar unservices3. This selective avoidance of actually readder-cutting their purchasing power. This omission is ing OPEC statements to divine OPEC’s motivations is particularly noteworthy because in the mid-1990s, common in classic economic papers and will be adOPEC was vociferous about the declining US dollar dressed later. (e.g., Tachibana, 1995; Hammadi, 1995; Platt’s OilAmano and van Norden’s (1995, 1998) influengram News, 1995) and enacted production quotas to tial works on the US dollar and exchange rates conforce the nominal price up (1996; DeMis, 2000). Nevertheless, Amano and van Norden’s work cludes that the “…two variables appear to be cointegrated and that causality runs from oil prices to the CONTINUED ON PAGE 50
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1: Caution to readers. Many papers address oil price effects on currencies besides the US dollar. These non-US dollar papers are irrelevant to OPEC and to this discussion because OPEC transacts in US dollars almost exclusively.
2: For example: New York Times, August 4, 1977 headline: “OPEC might switch to SRDs if Dollar Plummets, Officials Says”; New York Times, March 17, 1978 headline: “For Oil Pricing, a Basket of Currencies in Offing?” to list only a very few. 3: Petroleum Intelligence Weekly, May 12, 1980, cited in Samii and Clemenz (1988)
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LEAD STORY economic papers” is noteworthy, but not unusual.4 The second problem is that economists rarely write retrospectives. An economist who reviewed DeMis (2000) said, “What you have done is an historical retrospective. Historical retrospectives in economics are very out-of-favor today. Nobody gets tenure for publishing them.” (Dr. J. Farley, 2000, personal communication). Books like, This Time is Different, are brilliant exceptions to this generalization. Papers that are not classical economic analyses, and OPEC press releases, show OPEC has long offset the declining US dollar by enacting production quotas to increase nominal prices (2000). Non-classic economic papers written by members of OPEC (e.g., Hammadi, 1995; Salman, 2004) contain no ambiguity about causation running from drops in the US dollar to lost OPEC revenue, and OPEC-orchestrated nominal price increases. The analysis provided in this paper uses a simple exchange rate model to calculate oil’s value to OPEC. When oil prices are viewed in an historical RGP analysis, in concert with OPEC statements and other reports, OPEC’s motives, and long-term price moves can be more easily understood.
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dominated economists’ writings. For example, Marten (2008) states in Current Economics, “The causality between the USD and oil is usually assumed to work from the oil price to the USD” (emphasis added). Even today, popular news outlets stridently echo economists’ consensus about causality with news articles titled, “Why Oil Prices Affect Exchange Rate, not Vice-Versa” (Norman, 2015). Beckmann et al (2017) provide a review of classic economic literature on exchange rates and oil prices. Their conclusion on causality derives from an arcane distillation of 47 classic economic papers. They conclude, “…causality from US dollar depreciations to increases in the price of oil often materializes at a daily frequency or over a few months” (emphasis added). Their analysis is entirely weighted by the previous 12 years when prices responded quickly to dollar changes. US dollar depreciations in 1990s caused OPEC to increase prices (e.g., DeMis, 2000, Salman, 2004); however price changes did not happen “over a few months”, but over a year or more (ibid.) Classic economic papers have two systemic problems. They are mathematically dense treatises that render voluminous data and complex mathematical formulae into computer models. The resulting numbers are then groomed for statistically significant relations (e.g., Uddin et al, 2013). Classic economic papers have no mechanism for capturing quotes from OPEC about drops in the dollar’s value because “statements” cannot be digitized and put into a formula. Indeed, the word “OPEC” is included once, and only in the context of citing another paper, in Beckmann et al’s (2017) review of 47 classic papers! Economists’ exclusion of OPEC minister’s disgust for falling a US dollar, as quoted in newspaper articles and even non-economic journal, from their “classic
VALUE OF THE US DOLLAR
The value of the US dollar must be calculated to define the RGP of oil. The value of the US dollar is calculated using a reference basket of currencies: the G-7 countries plus the Swiss franc. The basket is weighted with respect to each country’s gross domestic product (GDP). Figure 3 shows the value of the greenback over the OPEC era. Parity (100%) is set to the dollar’s value in 1970. After 2000, the value of the US dollar shown is the trade-weighted average provide by the Federal Reserve of St. Louis (FRED data). The FRED data series is corrected 20%
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4: Please see Daniella D. Booth’s book, Fed Up, for insights into academic and detached concerns of economists at the Federal Reserve. Per Ms. Booth, what was eye-opening was not that dozens of PhD economists missed the mortgage and banking meltdown of 2008, but that they were still running computer models which showed everything was all right. “They could have looked out the window and seen things were not okay.” Ms. Booth correctly predicted the ‘08 crash, as did the men celebrated in the book and popular movie “The Big Short.” None of them, including Ms. Booth, have PhDs in economics.
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to fit the 1970 base. The US dollar’s value is also calculated by the International Monetary Fund (IMF) and is expressed in Special Drawing Rights (SDRs). SDRs are the pseudo currency the IMF uses to determine member countries reserves. SDRs are expressed as a percent of their 1970 base and used as calibration points on Figure 3 (much like vitrinite reflectance is used to calibrate a maturation model). Both the pre-2000 basket of currencies and the corrected FRED data fit the SDR calibration points. This RGP analysis also includes a correction for inflation. The GDP deflator for the reference basket of currencies is used. Interestingly, the US GDP deflator produces virtually the same results.
REAL GLOBAL PRICE
FIGURE 3: Value of the US dollar on global currency markets. Reference
basket of currencies is weighted with respect to each country’s GDP. Parity (100%) is the value of the basket in 1970. After 2000, the Federal Reserves of St. Louis’ trade-weighted value of the dollar is used (from FRED website). The FRED data series is corrected to a 1970 base. Calibration points (black dots) are the IMF’s calculation of the US dollar’s value as expressed in SDRs, also corrected to a 1970 base. Semi-annual data series.
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manipulated by a cartel; value does not find a natural equilibrium. The two episodes of high RGP of oil brought on large non-OPEC production from provinces like the North Sea, the North Slope, and the North American “shale revolution” (Figure 5).
Figure 4 shows the Real Global Price of oil. OPEC had strong purchasing power in two periods, 1974 to 1986, and 2005 to 2014. One could suggest that oil was over-valued during these times, when it was over about $40/bbl (RGP). OPEC’s painful threshold is defined by times when OPEC called for abandoning the US dollar as the basis for pricing oil (e.g., 1995), or when non-OPEC countries collaborated with OPEC to cut production (e.g., 2016). OPEC and non-OPEC countries collaboration in 2016 suggests that their imbedded social cost (and military costs) have risen significantly. Thus, OPEC’s lower threshold in 1973 to 1995 was $18/bbl (RGP). By 2016, OPEC and non-OPEC’s lower threshold appears to be $28/bbl (RGP), although this new “painful threshold” is too new to be clearly defined. History is always the best guide. Oil has long had a value floor. Before OPEC, the Texas Railroad Commission defended prices in times of excess supply (Yergin, 1991). Oil can be over-valued because its value is
HISTORICAL ANALYSIS
Bretton Woods System The Bretton Woods system fixed the US dollar’s value on global currency markets from World War II until 1971. The collapse of this system, and floating the US dollar, allowed the greenback to swing wildly on global currency markets; gaining and losing as much as 45% in value. This monetary event has been
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the single biggest driver of the vicissitudes of US oil industry since 1973 (DeMis, 2000; SnD 70037). Changes in the US dollar’s value are sparingly mentioned in The Prize (Yergin, 1991). Indeed, Yergin (1991) makes no mention of “Bretton Woods” or the date, “August 15, 1971” in his book. But its collapse profoundly affected OPECs purchasing power and resulted in the 1970s “price shocks”. In 1944, major Allied Powers held a meeting at Bretton Woods, New Hampshire to establish a post-war basis for currency exchanges. The Bretton Woods agreement created a modified gold exchange among signature countries. The FIGURE 4: Real Global Price (RGP) of oil throughout the OPEC era. “Real” US treasury agreed to make gold and the price of oil shown by dashed line. OPEC had more purchasing power in US dollar convertible for foreign banks 1973-‘85, than in 2005-‘14. Above about $40/bbl (RGP) oil is over-valued. at $35/oz. Each nation agreed to fix its Point A shows when rising greenback gave OPEC strong purchasing currency to a 1% trading range with repower, even as “real” prices fell. Point B shows when OPEC’s purchasing spect to the dollar. The US dollar became power in RGP terms was the same as 1973. Point C shows that the recent as “good as gold,” the world’s reserve cur“real” price high had less value in a RGP analysis. OPEC’s lower limit to rency. The US became the world’s banker. purchasing power, it “painful threshold” was $18/bbl (RGP). In 2016, this Bretton Woods worked very well imthreshold seems to have risen to about $28/bbl (RGP). mediately after WW II when Europe had no gold and needed to re-build using US dollars (from the Marshall Plan). But things never of Zurich. By July, 1971, the US had only 10 billion stay the same. of gold bullion left (Spencer, 1974). On August 15, Europe re-built and their economies grew. By the 1971, President Nixon announced that the “gold win1960s, European countries had recapitalized their dow” was closed and Bretton Woods came to an end. central banks (backed by gold and US dollars), and gained stable currencies in their own right. By the REAL GLOBAL PRICE EVENTS early 1960s, it was generally agreed by central banks The Real Global Price of oil is controlled by inflathat there were too many dollars in circulation; the tion, by drops in the nominal price of oil (because of dollar was overvalued. Attempts to “defend the dolexcess supply), and by of drops in the value of the US lar” by the London Gold Pool in the 1960s failed dollar. Of the three factors, drops in the value of the (Ghizoni, 2013). Then things got worse. By the late US Dollar have most vexed OPEC. The following his1960s, inflation from the war in Vietnam and defitorical analysis traces changes in the US dollar’s valcit spending on President Johnson’s Great Society ue, and OPEC’s response. program (Spencer, 1974; IMF Bulletin, 2008) caused profound downward pressure on the US dollar. 1973-‘74 Many countries, notably France and Switzerland, After the Bretton Woods collapse, the greenback converted their US dollars to gold at $35/oz while was floated. It floated like a rock. An attempt to peg the free market price rose to $40/oz on the street CONTINUED ON PAGE 53
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the dollar with the Smithsonian Accord failed. In December, 1971, the US dollar was devalued by 9 percent. In February, 1973, the dollar was devalued by another 10 percent. Up to this time in history, two back-to-back devaluations of a currency in 14 months were the province of banana republics - not the oncemighty greenback. By March, 1973, OPEC was demanding the amendment of the January 1972 Geneva Agreement in response to the falling US dollar and wanted “full compensation as a result of the devaluation of the US dollar” (MEES, 1973). By the fall of 1973, OPEC purchasing power was FIGURE 5: Real Global Price and new oil supplies. Production profiles at a low (Figure 6). Nominal oil prices depicted schematically, not to scale. Above about $40-45/bbl (RGP), the were about 3.5/bbl. In October of 1973, high value of oil brings on major new oil supplies. after the price of gold had tripled and the price of corn and wheat had doubled (Rogers, 1994), OPEC announced the oil The “oil price shocks” of the early 1970s were embargo and a new OPEC posted nominal price of OPEC’s reaction to lost purchasing power from the $5.11/bbl. The embargo ended in March, 1974, folerosive effects of a decade of inflation that was comlowed by nominal oil prices rising to $11/bbl. pounded in a 21% drop of US dollar’s value on globThe US dollar regained value after the 1974 “oil al currency markets (DeMis, 1996, 2000; Salman, price shock”. Economists felt that the US could better 2004). OPEC members were finally reacting to their weather future “oil price shocks” by virtue of robust loss in purchasing power when supply and demand US production (Tucker, 1992). Countries that had no tightened. The first Arab Embargo of 1967 was comoil production saw their trade deficit soar, and the pletely forgotten because excess oil supplies made it value of their currency fall. a non-event (Yergin, 1991). Much has been made of the “geopolitical theater” and OPEC’s use of “the oil weapon” to explain 1979 the price spike of the early 1970s (e.g., Yergin, 1991). In 1979, the value of the US dollar fell because The Prize is a brilliant book, but it has only a few US oil production had not reduced US reliance on paragraphs and sentences that mention the US dolOPEC oil as had been expected, and the US balance of lar’s collapse. Certainly, the West’s support of Israel trade continued to be negative (Tucker, 1992). The during the Yom Kippur War in 1973 did pique Arab US was consuming more OPEC oil in 1979 than it had nations. But OPEC’s frustration with the declining 5 years prior. From 1977 to 1979, nominal oil prices US dollars goes all the way back to late 1970. Before rose from $13/bbl to about $14.85/bbl. But the dolthe December 12, 1970 meeting in Caracas, OPEC lar fell 17%. The US dollar’s fall cut OPEC’s purchasresolved that reference prices for OPEC oil should ing power as shown by the RGP of oil (Figure 6). be adjusted for drops in the dollar to maintain “purIn 1979, OPEC openly explored alternatives chasing power of members countries oil revenues” to the US dollar (Samij and Clemenz, 1988). Some (Salman, 2004). CONTINUED ON PAGE 54
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members suggested that oil be priced in a basket of currencies. But the “basket of currencies” schemes were deemed too impractical for both buyers and sellers. The revolution in Iran took 4 million barrels of crude oil and condensate off the market. Nominal oil prices soared to $39/bbl, the RGP of oil doubled; so everyone forgot about the 17% drop in the greenback.
Mid 1980s In the mid-1980s, the value of the US dollar soared because of large differences in real interest rates between the US and Europe. Between 1980 and 1985, the US dollar gained 50% against FIGURE 6: History of the RGP of oil and US dollar- Part 1. After Bretton the Japanese yen, Deutsche Mark, French Woods system ended, the US dollar fell 21%. Point A: in 1973, OPEC’s Franc, and British pound. In 1985, one purchasing power reached an all-time low. OPEC reacts to dollar drops US dollar could buy one British pound. by increasing oil to almost 11/bbl. Point B: by the late 1970s, the dollar OPEC’s purchasing power was at had fallen by over 15%, nominal prices were dragged down. OPEC openly its zenith. The US dollar’s high value aldiscussed pricing alternative to the US dollar. Point C: revolution in Iran lowed Saudi Arabia to maintain purpushed nominal prices up to $39.5/bbl. chasing power yet cut its production to maintain nominal prices. Saudi Arabia members wanted higher prices and more purchasbecame the “swing producer” during this period of ing power. But the 21st century inverse relationship high US dollar value. Saudi Arabia’s production fell to less than 4 million barrels per day by 1985. between oil price and the US dollar’s value could not In September, 1985, the Plaza Accord was immaterialize in a market flooded with oil. OPEC had plemented to depreciate the US dollar (Henning and tough time. Destler, 1988) (Figure 3). Perhaps not coincidenBy 1995, the RGP of oil dropped to the “painful tally, three months later, in December, 1985, Saudi threshold” set in 1973. (Figure 7). This loss of purArabia’s Oil Minister, Sheik Yamani, declared Saudi chasing power was worse than 1973 because OPEC Arabia would no longer be the swing producer and economics had fundamentally changed. Important would pursue a market share policy (MEES, 1985). OPEC countries obtained 60-90% of their revenue Nominal oil prices fell from $30/bbl in November, from oil sales. In 1973, OPEC countries consumed 1985 to $10/bbl in March 1986. about 1 million barrels a day. By 1995, OPEC countries were consuming 5 million barrels a day, or oneMid 1990s fifth, of their own quota (Gately, 2013). After the Plaza Accord, the US dollar began a The 1995 oil consumption numbers show that long slide down to a nadir in 1994-’95. By 1995, one key OPEC countries had moved from mostly rural dollar could only buy 85 Japanese yen. From 1990 populations to fully modernized economies with to 1995, the US dollar fell nearly 15%. The nominal price of oil sank from $25/bbl in 1990 to $17/bbl in a burgeoning middle class, with subsidized health 1995. OPEC was frustrated by the declining dollar, CONTINUED ON PAGE 55
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care and education cost which had to be paid for with oil revenue (DeMis, 2000). OPEC needed more purchasing power from oil sales in 1995 than it did in 1973. Once again, as happened in 1979, OPEC’s response to this drop in the US dollar’s value was to openly call for abandoning the US dollar (Platt’s Oilgram News, 1995). Various pricing schemes were publically offered: the Iranian Oil Minister suggested that oil be priced in yen; the Algerian oil minster suggested that OPEC adopt an SDRbased pricing system; the United Arab Emirates (UAE) oil minster suggested FIGURE 7: History of the RGP of oil and US dollar – Part 2. Point A: the value oil be priced using a basket of currenof the US dollar peaked in 1985 thereby maintaining OPEC purchasing cies (Tachibana, 1995). OPEC oil minpower. Point B: by 1995, OPEC’s purchasing power was as low it was isters’ threats to drop the US dollar are in 1973. Point C: RGP of oil drops to new low. OPEC and non-OPEC the under-reported news of the decade! collaborate to push prices up to the middle of the Post-1986 trading range, OPEC’s comments confirmed their Point D. long disgust with the falling dollar, and their dire need for more purchasing sweating” (sensu J. D. Rockefeller; see Yergin, 1991) power. In the mid-1990s, many people suggested and would not blink on cutting production to stabiOPEC was dead. OPEC would never hold a produclize prices. tion quota again (e.g., Bahree and Tanner, 1995). IrThis event does not fit the exchange rate-oil valrespective of differences within OPEC, it was clear ue story being told here. But the event is important from OPEC member’s statements that OPEC would because it showed that many countries had a painmake a production agreement at their 1996 meetful threshold. In 1999, the RGP of oil was far below ing. Prices rose to their post-1986 RGP trading range OPEC’s “painful threshold” set in 1995. Many non(DeMis, 2000). OPEC oil producing countries felt the pain! Non1998-‘99 OPEC countries sent representative to attend or In 1998, nominal oil prices collapsed to $10/bbl. “observe” OPEC meetings. Key non-OPEC countries The US dollar had strengthened by 15% off its 1995 Norway and Mexico worked with OPEC to get an low. Oversupply was the driving factor, not the valagreement to cut production by 2 million barrels a ue of the US dollar. OPEC had raised its production day (Ibrahim, 1999). With non-OPEC countries and quota just before a recession hit Asia. This caused a chronic OPEC cheaters now toeing the line, Saudi profound slump in oil demand (Clayton, 2015). Up to Arabia agreed to take the largest cut of 500K bbl/day 1997, most of the growth in world oil consumption (ibid). Prices quickly rebounded to their post-1986 was from Asia. trading range. This collaboration presaged non-OPEC Also, Saudi Arabia had grown weary of Venezuecooperation of 2016. This intervention is part of the la’s chronic cheating on quotas. Saudi Arabia wanted long history of oil: before OPEC, the Texas Railroad to give Venezuela and other quota cheaters “a good CONTINUED ON PAGE 56
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Commission defended prices in times of excess supply (Yergin, 1991).
2005-2014 After 2005, the greenback began a long slide caused by exploding US deficits from fighting two post-9/11 wars (Paul and Quenemoen, 2003; DeMis, 2016). The greenback dropped 36% from 2002 to 2008 (Figure 8). By 2005, OPEC surplus capacity fell to less than 1 mmbo/day (Fattouh, 2006). Now that supply and demand were tight, OPEC (and day-traders in commodity “pits”) could make almost daily adjustments to nominal prices to offset changes in US FIGURE 8: History of RGP of oil and the US dollar – Part 3. Point A: the US dollar’s value - as OPEC had long wantdollar drops over 30% by 2008. Point B: after 2004, with oil supplies tight, ed to do. OPEC quickly offset the declining greenback with higher nominal prices. Figure 8 also shows that after 2005, Point C: trading range for 2000-2005. Point D: OPEC was challenged by the oil-dollar inverse relationship was “American oil supply shocks” and allowed prices to fall. Point E: in 2016, manifestly established and continOPEC and non-OPEC countries collaborate to push up nominal prices. Point ues today. This relationship might have F: a new painful threshold of about $28/bbl (RGP) appears have been set. originated from former Deputy Secretary-general of OPEC, Ramzi Salman’s suggestion in the influential journal, Midin resource plays. By 2006, America had entered the dle East Economic Survey, that OPEC “…change the “shale revolution.” The high value of oil encouraged, present price range to a floating (range) that moves and forgave, the requisite experimentation needup and down, linked to an index based on a based to perfect innovation. Just as important, peaking ket of currencies” (Salman, 2004). Although Salman oil prices brought an abundance of money to the “oil warned this pricing scheme could bring new instapatch” through private equity partnerships. bility to “an oil market already crammed with many unpredictable factors” (ibid), it was exactly what 2014-present OPEC had been doing in slow motion throughout the The value of the US dollar rose because of chang1990s (e.g., DeMis, 2000). es in economic fundamentals. The World EconomFrom 2005-2014, demand was driven by tight ic Outlook predicted the US GDP would grow at oil supply and growing oil exports to China (Fat0.5%, whereas the Eurozone countries would grow touh, 2006). OPEC firmly controlled oil prices. And at -0.3%. Especially important was the weak forejust like in the early 1980s, OPEC over-corrected the casted growth for Germany at -0.5%, and Japan at price. Oil became overvalued. Again, the high value -0.7% (Rosenberg, 2014). Also, the perception that of oil discouraged consumption and encouraged new the Federal Reserve would begin raising interest rate supplies of oil outside OPEC. buoyed the US dollar. European Central Banks were The high RGP of oil was coincident with, and at effectively negative interest rates (Irwin, 2014). nurtured, American ingenuity and entrepreneurialYield on the 10-year Treasury bond was 1.9%, versus ism in horizontal drilling and multi-stage fracking CONTINUED ON PAGE 57
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0.2% for comparable German and 0.4% for Japanese notes (Smith, 2015). Money looking for real yields flowed into the US and lifted the greenback. In 2014, oversupply put downward pressure on OPEC’s prices. In February, 2014, Iraq oil production increased by 520 thousand b/d. America’s production climbed to 8.5 million b/d, up incrementally 3.3 million b/d over the baseline. In the 1970s, the world had to deal with OPEC “oil price shocks.” Now, OPEC had to deal with “American oil supply shocks.” The sophistry of “Peak Oil” was forever dead. OPEC held proFIGURE 9: Nominal oil and gold prices. The two commodities track each other closely except during two episodes, marked by A and B. From 1986 duction flat while rising American proto 2000, and 2014 to present, oil and gold’s long-term relationship became duction displaced OPEC imports. The decoupled because of oversupply. Oil was under-valued in these times. 2014 oil price crash occurred because of excessive US-driven supply, not a rising dollar. COMMODITY ANALYSIS A rising greenback helped OPEC retain purchasA commodity analysis corroborates the exing power even as oil prices dropped. For almost two change rate analysis implicit in this RGP retrospecyears, Saudi Arabia kept output steady in the hope it tive (Figure 9). Gold has always provided a standard would slow the US shale revolution (Blas, 2018), demeasure for any currency’s strength. Only recentstroy the expensive tar sands (Berman, 2016), and ly has paper currency been unpegged to any metal. chase investors out of the “oil patch.” This strategy This analysis is also relevant because OPEC had once slowed many “shale plays,” and many companies had tried to peg oil prices to gold to combat declines in to file for bankruptcy protection, but American prothe greenback (Salman, 2004). duction continued to grow. From 1960 to 1986, one ounce of gold bought By 2016, OPEC and other non-OPEC oil produc11.5 barrels. When the RGP was low, from 1986 to ers realized they needed to cut production to restore 2000, one ounce of gold bough 21 barrels of oil. Oil purchasing power. They had reached a new “painful was undervalued with respect to gold. From 2005 threshold.” On October 10, 2016, Russian President thru 2014, when the RGP was high, this historic oilgold relation was restored: one ounce of gold bought Vladimir Putin announced Russia will support OPEC 12.8 barrels of oil. Since 2015, the oil-gold relation goals of cutting global crude output. On November 5 has become decoupled again. One ounce of gold buys 30, 2017, OPEC and Russia agreed to extend their 27 barrels of oil on average for that period. In the 1.8 million b/d production cut to the end of 2018. last 3 months, one ounce of gold buys 21 barrels of This announcement and declining production in Ven-
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ezuela lifted nominal oil prices.
5: There are 10 non-OPEC partners, as reported in Platt’s January 22, 2018. Russia is the most significant.
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oil; oil prices are rising with respect to gold. The same rise can be seen in the RPG analysis.
TODAY’S TRADING RANGE
Oil prices today trade in a range of about $45 to $70/bbl (DoD). This nominal price range converts to $30-46/ bbl (RGP). This range is a bit higher and broader than the RGP trading range established for 2000-05 (DeMis, 2016). Today’s range is shown on Figure 10. The lower end of this trading range is questionable because the new painful threshold of $28/bbl (RGP) is poorly defined: there is not enough history on the super alliance of OPEC and Russia, and how they will cooperate. The width of the trading band, $16, is wider than the 2000-2005 trading band for the same reason.
FIGURE 10: Projected nominal oil prices in a RGP analysis with falling US
dollar. This 5-year projection assumes the value of the US dollar drops by 25% and inflation is 2%. Point A: 2014 to present inferred trading range of $30 to $46/bbl (RGP).Note that $80/bbl shifts to the low end of the new trading range. In such a scenario, OPEC (and possible non-OPEC) countries would cut supplies to regain purchasing power.
PRICE PREDICTIONS
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show the price pessimists that they were wrong. A RGP model showed that at $10/bbl (DoD), oil’s value would be below OPEC’s “painful threshold” established in 1995. It was proposed that OPEC would have to make production agreements to quickly push oil prices to $25 or $30/bbl (Please see AAPG SnD #70037).
Prediction of the Past The robustness of a model can be judged by the validity of its predictions. Using a RGP analysis, DeMis (1996) concluded: “Towards the end of this decade, as global oil demand catches up with supply, there will be extreme pressure on oil producing countries to steeply raise prices to correct for the dollar’s drop, or possibly even abandon the US dollar as the basis for pricing oil.” In 2004, global demand caught up with supply, and nominal oil prices rose steeply to correct for the dollar’s drop; rising from $35 to $120/bbl. The “inverse dollar-oil” relation of today was born. In November, 2000, Iraq abandoned the US dollar as a basis of pricing oil. In April, 2008, Iran dropped the US dollar as the basis for pricing oil. DeMis (1996) presented a “what-if scenario” to show what would happen if oil prices fell to $10/bbl (DoD) in the then-near future, circa 1998; to demonstrate how a RGP analysis works; and to
Case Study: ARCO sells to BP It might seem that the effects of the changing value of the US dollar on OPEC have long been known by economists, major oil companies, and investment bankers. This is not true. In 1999, ARCO did not have economists or investment bankers advising them who were familiar with the concept. During the 1998-‘99 oil price collapse, oil fell to $10/bbl (DoD). ARCO’s CEO, Michael Bowlin, was convinced that oil prices would stay low for years. Former President of ARCO International Marlan Downey recounts, “There
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LEAD STORY assumes the US dollar falls 25% gradually over 5 years, and 2% annual inflation. A 25% drop in the greenback is not unreasonable. The dollar fell over 30% from 2002 to 2008. With a 25% decline in the US dollar’s value, $80/bbl (DoD) oil would move to the low range of the RGP trading, and be close to the new “painful threshold” of $28/bbl (RGP). The US dollar will drop sometime in the near future. The greenback is still the major reserve currency of the world. However, the world, not just long-suffering OPEC, will not tolerate this major reserve currency being debased and continuously devalued by exploding federal deficits.
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was no way we could convince our CEO that oil prices would ever recover” (Downey, Personal Communication, 2008). Mr. Bowlin unilaterally called a meeting with Sir John Brown, Chief executive of BP, and proposed that BP buy ARCO. Sir Brown was reported to be shocked by the offer (Salpukas, 1999). Mr. Bowlin told reporters that with “the uncertain future of oil prices, (this sale) is a good deal for the ARCO shareholders” (ibid). Mr. Bowlin had bankers on his side: “Analysts advised that unless crude oil prices recovered the company would see its earnings decline and have trouble paying it annual dividend” (ibid). ARCO sold at the lowest RGP of oil in the last 50 years (Figure 7). Shareholders lost tremendous value because ARCO, and the bankers advising it, lacked an analysis that showed oil’s value to OPEC. And not incidentally, thousands of ARCO employees lost their jobs.
CONCLUSIONS
Over the long term, oil prices are driven by the value of the US dollar in the post-Bretton Woods era. In times of tight supply, OPEC can offset the dollar’s drops in value by increasing the price of oil. Oil can become over-valued because a cartel prevents oil prices from finding a natural equilibrium. In times of excess supply, OPEC cannot immediately offset drops in the US dollar. In times of very low value, OPEC, and even non-OPEC countries, put aside their differences and make production accords to regain purchasing power. A Real Global Price analysis is a superior method for assessing past OPEC actions and historical trends because it measures OPEC’s purchasing power, and because it is simple. Long-term oil price behavior can be better predicted using a RGP analysis. The trading range for oil prices today seems to be $45-70/bbl (DoD), but this price range can change dramatically when the US dollar changes value.
Future Predictions Many factors can affect the price of oil. For example, the socialist paradise of Venezuela is running out of other people’s money, the economy is collapsing, and its oil production is falling fast. This supply short-fall could force oil prices up. Conversely, if “American oil supply shocks” feed more oil into the global market, prices will go down - unless OPEC and non-OPEC countries want to cut production to make room for American oil. Oil might be priced in other currencies. China has set up a futures market for trading oil priced in yuan. News reports claim that China is pressuring Saudi Arabia to price oil in yuan. News reports claim that a cabal led by China and Russia want to abolish the US dollar as the basis for pricing oil. This could force oil down. And so on. No price prediction can incorporate all the important factors with any semblance of accuracy. But a simple way to consider future oil price behavior is to just look at the purchasing power of oil with respect to the people who (try to) control the price. Figure 10 shows $80 to 40/bbl (DoD) projected out 5 years using a RGP analysis. This model Vol. 67, No. 5 | www.rmag.org
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LEAD STORY html; Accessed March 5, 2018 Spencer, M. H., 1974, Contemporary Economics: Worth Publishing, Inc., New York, 670 p. Tucker, Michael, 1992, The Impact of Nondollar-Denominated Oil Pricing: Eastern Economic Journal, vol. 16, no. 2, pg. 229 – 235. Trehan, Bharat, 1986, Oil Prices, Exchange Rates and the US Economy: An Empirical Investigation: Economic Review, Federal Reserve Bank of San Francisco, No. 4, pg. 25-41 Tachibana, Toru, 1995, OPEC pricing reviewed: SDRs or a declining US Dollar?: Middle East Economic Survey, v. 33, no. 44, p d1-d4. Uddin, Gazi s., A. K. Tiwari, M. Arouri, F. Teulon, 2013, On the Relationship between Oil Prices and Exchange Rates: A wavelet analysis: Economic Modelling, v. 35, p. 502-507. Yergin, D., 1991, The Prize: The Epic Quest for Oil, Money and Power, Simon & Schuster, New York, 885 p.
»»CONTINUED FROM PAGE 60
article/214-general/43906-fall-of-the-dollar.html; accessed 2/2018. Platt’s Oilgram News, 1995, An Old Question Arises Anew: Will Dollar Stay as currency of Oil?: Platt’s Oilgram News, Standard & Poor’s, vol. 73, no. 83, May 1, p. 1-4. Rogers, J., 1996. The Spector of Inflation: Worth Magazine, February Issue, p. 35-37. Salpukas, Agis, 1999, It’s Official: BP is Planning to Buy ARCO: The New York Times, April 2, 1999. Samii, Massood V., and Claude Clemenz, 1988, Exchange rate fluctuations and stability in the oil market: Energy Policy, vol. 16 no. 4, pg. 415-423.
Salman, Ramzi, 2004, The US dollar and Oil Pricing Revisited: Middle East Economic Survey, vol. XLVII, no. 1. Smith, Anne K., 2015, Why the Strong US dollar Scares Investors: Kiplinger, June. https://www. kiplinger.com/article/investing/T038-C008S002-why-the-strong-u-s-dollar-scares-investors.
CALL FOR PAPERS: THE RMAG MOUNTAIN GEOLOGIST
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Professional Awards Committee Seeks Nominee Suggestions accomplished outstanding earth science exploration within recent years or throughout career Outstanding Scientist – given for having conducted or reported outstanding earth science studies Distinguished Service to RMAG – given for contributions to the RMAG in meaningful and beneficial ways Distinguished Public Service to Earth Sciences – given to recognize contributions to earth sciences outside the framework of regular job responsibilities Geosciences in the Media – given for a journalistic achievement of notable benefit to the profession or public understanding of geology, exploration or resources President’s/Special Awards – given for an achievement that does not have a specific category
The RMAG Professional Awards Committee is seeking nominee suggestions for the 2018 RMAG Professional Awards to be presented at the November Rockbuster’s Bash. Please contact Debby Sycamore, Committee Chair at sycamore777@comcast. net or (303) 881-0876 with suggestions by June 15, 2018. For additional information on awards criteria and to see lists of past award recipients, please go to www.rmag.org and click on “Committees”, then “Professional Awards”, then” Previous Awardees”. Thanks in advance for your thoughtful input in nominating those who deserve recognition. The seven categories of awards are as follows:
Honorary Member – given for outstanding service to geology and/or the RMAG Outstanding Explorer – given for significant energy or mineral discovery(ies) or for having
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Vol. 67, No. 5 | www.rmag.org
Are You a Photographer? Rocky Mountain Association of Geologists would like to invite you to submit your digital images that capture the geology of the Rocky Mountain region. Pore Throat to Outcrop, Modern Analogs, Oilfield Activity (Rigs), Dinosaur Trackways. These images will be used on the cover of the Outcrop and a select number will be used in a forthcoming RMAG Calendar.
• All images will be accredited to the photographer • A brief description of the image (location, formation, significance) • The file size must be 300dpi or greater and be in TIFF or JPEG format. • Limit 10 images/person Vol. 67, No. 5 | www.rmag.org
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CALENDAR | MAY 2018 SUNDAY
MONDAY
TUESDAY
WEDNESDAY
1
2
THURSDAY
FRIDAY
SATURDAY
3
4
5
10
11
12
RMAG Luncheon. Speaker: Jeffery May.
6
7
8
9 RMAG Short Course. Speaker: Andy Duncan.
13
14
15
16
RMAG On the Rocks Field Trip.
17
DIPS Luncheon.
18
DWLS Luncheon. Speaker: Mike Miller.
20
21
22
23
28
24
25
26
PTTC Rockies Short Course at AAPG Convention.
AAPG Convention.
27
19 RMAG Geo Train RMAG Short Course at AAPG Convention.
29
30
31
RMAG Golf Tournament.
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